Advance Tax Provisions

• Taxation
• ||
• September 28, 2020

Advance Tax refers to payment of taxes before the end of financial year instead of round sum amount at the end. Also known as “Pay as You Earn” scheme an assesse is required to pay taxes in different installments during the year, i.e., the assesse should estimate his current income and pay advance tax however the exact amount shall be calculated at the year end and then the balance amount shall be paid.

Assesses required to pay Advance Tax

• If the income tax liability computed on estimated basis is more than Rs.10, 000 then the assesse is required to pay advance tax.
• A resident senior citizen, i.e., an individual of the age 60 years or more during the relevant financial year is not required to pay advance tax if he doesn’t have any income under the head business/profession.
• If the assesse has opted for income declaration under presumptive taxation scheme of section 44AD (for business) and 44ADA (for profession), such tax payers are required to pay advance tax by 15^th March of the relevant Financial Year and the payment shall be 100% of the tax liability.

Due dates for Payment
Advance tax is paid in four installments during the relevant financial year, the due dates and payment amount for which are as under:

Payment of Advance Tax
Advance Tax can be paid by the taxpayer

• Either on his own account, or
• In pursuance of an order of the Assessing Officer

Computation of advance tax
Tax can be computed on the current income as estimated by taxpayer at the income tax rates for the relevant financial year. Tax deducted or collected shall be deducted from tax so computed and the balance amount shall be used to compute advance tax liability. Also, any income tax reliefs and deductions shall be deducted while computing such liability. 

Interest Liability

1. When there is delay in filing of income tax returns
   • Interest u/s 234A is imposed when any person has paid income tax after the expiry of last date of filing of return of income.
   • Interest is charged @1% per month or part of the month for the period succeeding the last date of filing income tax return.
   • The period for which interest is to be charged shall commence from the date immediately following the due date of filing of return of income and ends on the date when return is furnished /filed.
   • The amount on which interest shall be levied is the amount of tax as calculated u/s 143(1) (intimation to tax payer) and in case of regular assessment, the tax on total income as reduced by any advance tax paid, TDS deducted or collected or any relief or deduction claimed.

2. When there is incomplete tax payment
   • Interest u/s 234B is imposed when advance tax has not been paid or is less than 90% of actual tax liability.
   • Interest is charged @1% per month or part of the month from 1^st April of the relevant Assessment Year up to the date of payment.
   • The amount on which interest shall be levied is the amount of unpaid advance tax or shortfall in payment of advance tax

3. When there is delay in payment of an installment of advance tax
   • Interest u/s 234C is imposed when any person has defaulted in payment of advance tax, i.e., advance tax paid is less than the amount required to be paid
   • Interest is charged @1% per month for a period of 3 months on the amount of default in each installment, but for the last installment interest is charged only for a period of 1 month.
   • No interest shall be paid if minimum amount of tax is already paid in each installment (for assesses other than those who opted for presumptive taxation scheme)
     

     Due Date for payment	Minimum Advance Tax
     By 15th June	12% of assessed tax
     By 15th September	36% of assessed tax
     By 15th December	75% of assessed tax
     By 15th March	100% of assessed tax

   • No interest shall be levied, if the shortfall is due to failure in estimation of the amount of capital gains or income from winning of lotteries, crossword puzzles, etc. or income from newly set up business, dividend income (in excess of Rs. 10 Lakhs), but the tax payer is required to pay tax on such transactions as part of subsequent installments or till 31^st March, if there are no installments pending.

At AJSH, we assist our clients in setting up business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, and trademark registration, business structuring and advisory services. If you have any questions or wish to know more about Advance Tax, kindly contact us.