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GUIDE ON ADVANCE PAYMENT OF TAX

GUIDE ON ADVANCE PAYMENT OF TAX

Liability for payment of advance tax

  • Tax shall be payable in advance during any financial year in respect of the total income(TI) of the assessee which would be chargeable to tax for the A.Y. immediately following that financial year.
  • Advance tax is payable during a financial year in every case where the amount of such tax payable by the assessee (after reducing TDS/TCS)during the year is Rs. 10,000 or more.
  • However, an individual resident in India of the age of 60 years or more at any time during the previous year, who does not have any income chargeable under the head “Profits and gains of business or profession”(PGBP), is not liable to pay advance tax.

Instalments of advance tax and due dates

Advance tax payment schedule for corporates and non-corporates (other than an assessee computing profits on presumptive basis under section 44AD or section 44ADA) – Four instalments

Due date of instalment Amount payable
On or before 15th June Not less than 15% of advance tax liability.
On or before 15th September Not less than 45% of advance tax liability (-) amount paid in earlier instalment.
On or before 15th December Not less than 75% of advance tax liability (-) amount paid in earlier instalment or instalments.
On or before 15th March The whole amount of advance tax liability (-) amount paid in earlier instalment or instalments.

Assessee computing profits on presumptive basis under section 44AD(1) or section 44ADA(1) to pay advance tax by 15th March

An eligible assessee, opting for computation of profits or gains of business or profession on presumptive basis in respect of eligible business referred to in section 44AD(1) or in respect of eligible profession referred to in section 44ADA(1), shall be required to pay advance tax of the whole amount on or before 15th March of the F.Y.

However, any amount paid by way of advance tax on or before 31st March shall also be treated as advance tax paid during the F.Y. ending on that day.

Interest for defaults in payment of advance tax

  1. Interest under section 234B is attracted for non-payment of advance tax or payment of advance tax of an amount less than 90% of assessed tax.
  2. The interest liability would be 1% per month or part of the month from 1st April following the F.Y. upto the date of determination of total income under section 143(1) and where regular assessment is made, upto the date of such regular assessment.
  3. Such interest is calculated on the amount of difference between the assessed tax and the advance tax paid.
  4. “Assessed tax” means the tax on total income determined u/s 143(1)/under regular assessment, as the case may be, less TDS & TCS.
  5. Where self-assessment tax is paid by the assessee under section 140A or otherwise, interest shall be calculated upto the date of payment of such tax and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section.

Interest for deferment of advance tax

Manner of computation of interest u/s 234C for deferment of advance tax by corporate and non-corporate assessees:

In case an assessee, other than an assessee who declares profits and gains in accordance with the provisions of section 44AD(1) or section 44ADA(1), who is liable to pay advance tax u/s 208 has failed to pay such tax or the advance tax paid by such assessee on its current income on or before the dates specified in column (1) below is less than the specified percentage [given in column (2) below] of tax due on returned income, then simple interest@1% per month for the period specified in column (4) on the amount of shortfall, as per column (3) is leviable u/s 234C.

Specified date Specified % Shortfall in advance tax Period
(1) (2) (3) (4)
15th June 15% 15% of tax due on returned income (-) advance tax paid up to 15th June 3 months
15th September 45% 45% of tax due on returned income (-) advance tax paid up to 15th September 3 months
15th December 75% 75% of tax due on returned income (-) advance tax paid up to 15th December 3 months
15th March 100% 100% of tax due on returned income (-) advance tax paid up to 15th March 1 month

Note – However, if the advance tax paid by the assessee on the current income, on or before 15th June or 15th September, is not less than 12% or, as the case may be, 36% of the tax due on the returned income, then, the assessee shall not be liable to pay any interest on the amount of the shortfall on those dates.

Tax due on returned income = Tax chargeable on total income declared in the return of income – TDS – TCS

Computation of interest under section 234C in case of an assessee who declares profits and gains in accordance with the provisions of section 44AD(1) or section 44ADA(1):

In case an assessee who declares profits and gains in accordance with the provisions of section 44AD(1) or section 44ADA(1), who is liable to pay advance tax u/s 208 has failed to pay such tax or the advance tax paid by the assessee on its current income on or before 15th March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of 1% on the amount of the shortfall from the tax due on the returned income.

Non-applicability of interest under section 234C in certain cases:

Interest under section 234C shall not be leviable in respect of any shortfall in payment of tax due on returned income, where such shortfall is on account of under-estimate or failure to estimate –

(i) the amount of capital gains;
(ii) income of nature referred to in section 2(24)(ix) i.e., winnings from lotteries, crossword puzzles etc.;
(iii) income under the head “Profits and gains of business or profession” in cases where the income accrues or arises under the said head for the first time.
(iv) income of the nature referred to in section 115BBDA(1) i.e., dividend in aggregate exceeding of Rs. 10 lakhs including in the assessee’s total income.

However, the assessee should have paid the whole of the amount of tax payable in respect of such income referred to in (i), (ii), (iii) and (iv), as the case may be, had such income been a part of the total income, as part of the remaining instalments of advance tax which are due or where no such instalments are due, by 31st March of the financial year.

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