Provisions related to Advance Tax
The scheme of advance tax requires every assessee to estimate his current income and if tax liability on such estimated income exceeds the specified limit, the assessee is required to pay the estimated tax in instalments during the financial year itself. Thus, an assessee is required to pay tax as he earns and therefore the scheme of advance tax is also known as ‘Pay as you Earn Scheme’.
Who is liable to pay advance tax? “Every person, whose estimated tax liability for the Financial Year is Rs. 10,000 or more, shall pay his taxes in advance in the form of advance tax.
For instance, if one is earning through capital gains, House property or business, the concept becomes relevant.
However, a resident senior citizen (i.e., an individual of the age of 60 years or above) not having any income from a business or profession is not liable to pay advance tax.
Any rebate due fetches you an interest of 0.5% every month, or, 6% annually, as in the case of an income tax refund.”
What are the due dates for payment of advance Tax? “Normal Cases:
1st Installment-On or before June 15th of the previous year- 15% of advance tax
2nd Installment-On or before September 15th of the previous year-30% of advance tax
3rd Installement-On or before December 15th of the previous year-30% of the advance tax
4th Installement-On or before March 15th of the previous year-25% of advance tax
Presumptive Cases:
An assessee, who declares his business or professional income in accordance with the presumptive tax scheme of section 44AD or section 44ADA, is required to discharge the whole amount of his advance tax liability on or before March 15th of the previous year.
YOU….can pay 100% of the advance tax in a single instalment on or before March 15 of the previous year.
What are the consequences of failure to deposit advance Tax? “The Income Tax Act provides for charging of interest for non- payment/short payment/deferment in payment of advance tax which is calculated as below:
- INTEREST U/S 234A: For late or non-furnishing of return, simple interest @ 1% for every month or part thereof from the due date of filing of return to the date of furnishing of return, on the tax as determined u/s 143(1) or on regular assessment as reduced by TDS/advance tax paid or tax reliefs, if any, under Double Tax Avoidance Agreements with foreign countries.
- INTEREST U/S 234B: For shortfall in payment of advance tax by more than 10%, simple interest @ 1% per month or part thereof is chargeable from 1st April of the assessment year to the date of processing u/s 143(1) or to the date of completion of regular assessment, on the tax as determined u/s 143(1) or on regular assessment less advance tax paid/ TDS or tax reliefs, if any, under Double Tax Avoidance Agreements with foreign countries.
- INTEREST U/S 234C: For deferment of advance tax. If advance tax paid by 15th September is less than 30% of advance tax payable, simple interest @ 1% is payable for three months on tax determined on returned income as reduced by TDS/TCS/Amount of advance tax already paid or tax relief, if any, under Double Tax Avoidance Agreement with forgiving contribution. Similarly, if amount of tax paid on or before 15th December is less than 60% of tax due on returned income, interest @ 1% per month is to be charged for 3 months on the amount stated as above. Again, if the advance tax paid by 15th March is less than tax due on returned income, interest @ 1% per month on the shortfall is to be charged for one month”