Advance Tax: Liability, Computation, Due Date & Payment of Tax

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Advance Tax: Liability, Computation, Due Date & Payment of Advance Tax. Advance tax is another means by which the Central Government collects tax in form of prepaid taxes. This scheme is known as “Pay as you Earn” i.e. the assessee is required to pay tax during the previous year itself, though such income is chargeable to tax during the assessment year. It is payable on Current Income in installments.

1. Liability for payment of advance tax

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The obligation to pay advance tax arises in every case where the advance tax payable is Rs. 10,000 or more

2. No Advance Tax

A resident senior citizen (aged sixty years or more), not having any income under the head “Profits and gains of business or profession”, shall not be liable to pay advance Tax

Advance Tax

3. Computation of advance tax:

  • (a) An assessee has to estimate his current income and pay advance tax thereon. He need not submit any estimate or statement of income to the Assessing Officer (A.O), except where he has been served with notice by the Assessing Officer.
  • (b) The A.O, if he is of the opinion that assessee is liable to pay advance tax, can serve an order under section 210(3) requiring the assessee to pay advance tax.
  • (c) The above order can be served by the A.O at any time during the financial year but not later than the last date of February.
  • (d) If the assessee feels that his own estimate of advance tax payable would be less than the one sent by the Assessing Officer, he can file estimate of his current income and advance tax payable thereon.
  • (e) In all cases, the tax calculated shall be reduced by the amount of tax deducted /collected at sources.

Key Notes:

  • a. Current Income includes all items of Income like Capital Gain both Long & Short term, winning from lotteries and crossword puzzles, etc. Agricultural Income of the relevant financial year shall also be included for rate purpose.
  • b. Where the assessee has paid the advance-tax as per the order made by the A.O u/s 210, the assessee shall still be liable to pay the Interest u/s 234B & 234C, if the advance tax is not paid as per the requirements of section 211.
  • c. The assessee cannot file appeal against the order passed u/s 210 as he can pay tax on his own estimate.
  • d. A person’s liability to pay tax as the agent of a non resident in respect of the non resident’s income arises only when for the relevant assessment year, the A.O serves him with a notice u/s 163 informing him of his intention of assessing him as such agent and, after hearing him, decides to treat him as agent. Till the procedure is followed and decision is reached u/s 163 for each relevant assessment year, the agent is not assessable at all. Hence, there is no liability on any agent to make any advance payment of tax under these sections in respect of non residents income merely because he was assessed as agent in preceding years. [H.L Sud, ITO v TELCO (1969) 71 ITR 457 (SC)] But once a person is held to be an agent for particulars assessment year, he may be required to make advance tax payment for that year. [Premier Automobiles Ltd. v ITO (1970) 76 ITR 1 (SC)] But, a person cannot be made liable for advance tax in respect of a non resident’s income for a past year by his being appointed the agent of the non-resident after the close of the financial year. [CIT v T.I & M. Sales Ltd. (1978) 114 ITR 59 (Cal)]

Due Dates of Advance Tax

a. For all Assessee (Other than Assessee covered u/s 44AD) [Section 211(1)(a)]

Due date of Installment Amount Payable
On or before the 15 June of p.y Not less than fifteen per cent. of advance tax liability
On or before the 15 September of p.y Not less than forty-five per cent. of advance tax liability, as reduced by the amount, if any, paid in the earlier installment.
On or before the 15 December of p.y Not less than seventy-five per cent. of advance tax liability, as reduced by the amount, if any, paid in the earlier installment or installments.
On or before the 15 March of p.y The whole amount of advance tax liability as reduced by the amount or amounts, if any, paid in the earlier installment or installments.

b. Assessee Covered u/s. 44AD (Presumptive taxation Scheme) th [Section 211(1)(a)]: Pay entire tax on or before 15 March of P.Y.

Key Notes:

  • a. Any amount paid by way of advance-tax on or before the 31st day of March shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of this Act.[Proviso to section 211 (1)]
  • b. If the advance-tax is payable as per the order/amended order of A.O which is served after any of the due dates specified above, the appropriate amount or the whole amount of the Advance-Tax, as the case may be, specified in such order, shall be payable on or before each of such of those dates as fall after the date of service of the order. [Section 211 (2)]
  • c. After making the payment of 1/ 2 Instalments, the assessee can increase/decrease the amount of remaining amount of Instalments in accordance of with his revised estimates of current income. In this case, he will have to pay interest for short payment of earlier instalments.

5. Payment of advance tax in case of capital gains/casual income [Proviso to section 243C]

Advance-tax is payable on all types of income including capital gains, winning lotteries and crossword puzzles, etc. However it is not possible for assessee to estimate this gain as are unexpected Therefore in such case it is provided that if any such income arises after the due date of any instalments then the entire amount of tax payable on such capital gain or casual income should be paid in remaining instalments of advance tax which st are due or where no such instalments is due by 31 March of the relevant F.Y. If the entire amount of tax payable is so paid, then no interest on late payment will be leviable

6. Assessee deemed to be in default [Section 218]

Assessee shall be held liable for interest and penalty u/s 220 & 221 if wont comply to pay within the due date specified.

7. Credit of Advance Tax [Section 219]

Any sum other than a penalty or interest , paid by or recovered from an assessee as advance tax, shall be treated as a payment of tax in respect of the income of the previous year and credit thereof shall be given to the assessee in the regular assessment.

8.Tax on Book profit u/s 115JB-Whether advance tax is payable:

Every company is liable to pay advance-tax having regard to the provisions contained in section 115JB. Consequently, the provisions of sections 234B & 234C for interest on default in payment of advance tax and deferment of advance tax would also be applicable where facts of the case warrant. [Circular th No. 13/2001, dated 9 November, 2001]

Assessee has to pay advance-tax in respect of book profits u/s 115JB, otherwise it is liable for interest u/s 234B & 234C.[CIT v Kotak Mahindra Finance ltd. (2004) 265 ITR (Bom)]

Companies liable to pay tax on the basis of MAT are required to pay advance tax and failure to pay advance-tax in respect of the same will attract interest u/s 234B & 234C. [JCIT v Rolta India Ltd. (2011) 330 ITR 470 (SC)]

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