Provisions Relating to Advance Tax

Provisions Relating to Advance Tax

A gist on provisions relating to Advance Tax (Sections 207 – 219) of the Income Tax Act, 1961

SL. NO. PARTICULARS INFORMATION/ INPUTS
1. Liability to pay Every person whose estimated tax liability for the year is Rs.10,000 or more is required to pay advance tax. (Section 208)
2. Persons not liable to pay A resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax. (Section 207)
3. Computation of advance tax Assessee has to estimate his income for the current financial and compute tax there on as per rates in force for the financial year. This computed tax shall be reduced by taxes deducted or collected at source. (Tax referred to as estimated annual tax)
4. Due dates for payment of advance tax a)      By 15th of June :  to pay not less than 15% of estimated annual tax as  advance tax

b)     By 15th of September :  to pay not less than 45% of estimated annual tax as advance tax as reduced by amount, if any, paid in earlier installment

c)      By 15th of December :  to pay not less than 75% of estimated annual tax as advance tax as reduced by amount, if any, paid in earlier installments

d)     By 15th  of March :  to pay 100% of estimated annual tax as advance tax as reduced by amount, if any, paid in earlier installments

For taxpayers who have opted for presumptive taxation scheme of section 44AD or section 44ADA have to deposit 100% of estimated annual tax as advance tax by 15th of March of the financial year. (i.e. In single installment)

(Section 211)

Note: Any amount paid by way of advance tax on or before 31st March shall also be treated as advance tax.

5. Payment of advance tax in pursuance of an order of the Assessing Officer If taxpayer fails to pay advance tax or  has paid advance tax but advance tax paid is lower than the required amount and where he has already been assessed by way of regular assessment in respect of total income of any previous year, then the Assessing Officer may pass an order under section 210(3) requiring him to pay advance tax on current year’s income (specifying the amount of tax instalments to be paid). Such an order can be passed anytime during the financial year but latest by last day of February.

On receipt of the notice from the Assessing Officer to pay advance tax, if the taxpayer’s estimate is lower than the estimate of the Assessing Officer, then the taxpayer can submit his own estimate of current income/advance tax and pay tax accordingly. In such a case, he has to send intimation in Form No. 28A to the Assessing Officer.

Alternatively, if the advance tax on current income as per own estimate of the taxpayer is likely to be higher than the amount estimated by the Assessing Officer, the taxpayer shall pay such higher amount as advance tax in accordance with his own calculation. In such a case, no intimation to the Assessing Officer is required.

The Assessing Officer can revise his order issued to the taxpayer to pay advance tax (as discussed above) under section 210(4). Such revision can be done subsequent to the passing of an order to pay advance tax but before 1st day of March of the relevant financial year. Such revision based on a return of income in respect of any later year that has been furnished by the taxpayer or based on any assessment for any later year that has been completed at a higher figure.

6. Consequences for non- payment or short payment of advance tax

 

Consequences for non-payment or short payment of advance tax:

1) Interest under section 234A, 234B and 234C levied on amount of shortfall in advance tax. (discussed in detail)

2) Penalty may be levied under section 221.

7. Interest under section 234C

 

a) Rate of 1% per month or for part of the month.

b) Interest is levied for deferment of advance tax or on short payment advance tax. However, if the amount of advance tax installment paid is more than 12% (15% applicable as on 15th June) or 36% (45% applicable as on 15th September) of tax due then no interest under section 234C is leviable.

c) Interest under section 234C is not applicable on failure to pay advance tax due to short estimation or under-estimation of tax which is pertains to :

  • Income from capital gains
  • Income from winnings in lotteries, crosswords and like, and
  • Profit from business in first year of business (i.e. income arises for    the first time under the head of business and profession).
8. Interest under section 234B

 

a) Rate : 1% per month or for part of the month

b) Period : From the 1st day of the assessment year

  • till completion of regular assessment or
  • date of determination of income under section 143(1) (if no regular assessment is made)

c) Interest is levied on shortfall in payment of advance tax. However, if the advance tax paid is more than 90% of actual tax liability then no interest shall be levied under section 234B.

9. Interest under section 234A

 

a) Rate : 1% per month or for part of the month

b) Period : From the due date of filing return

  • till the date of filing of return (in case return filed),
  • till the date of completion of reassessment or re-computation under section 147 or 153A (in case where return is not filed)

c) Interest under 234A is applicable where due date of filing return under section 139(1) is passed and applicable tax remains unpaid.

CBDT has clarified that no interest shall be levied under section 234A on self-assessment tax paid by assessee on or before due date of filing return.

10. Penalty under section 221 a) Penalty can be levied by assessing office for default in payment of tax including advance tax or interest thereon.

b) Penalty is levied only after an opportunity is provided to the assesse and assessing officer is not satisfied by the reasons provided by the assesse.

c) Such penalty can amount up to outstanding tax.

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