Advance payment of tax

Advance tax

• Advance payment of tax is another method of collection of tax by central government in form of prepaid tax.
• Tax shall be payable in advance during financial year.
• It is also known as "pay as you earn" scheme.
• It is payable on current income in instalment during previous year.
• It is addition to TDS or TCS.

• Liability for payment of advance tax ( section 207)

Advance tax arises when tax liability is 10000 or more

• Exemption from payment of advance tax ( section 208)
• A resident senior citizens , who does not have income from profits and gain business or profession.

2. Total tax payable is less than 10000.

3. Assessee engaged in civil construction business and income from such business calculated on presumptive basis u/s 44AD.

• (Section 209) : computation of advance tax

Step 1 : Estimation Of residential status.

Step 2 : Estimation of income under five heads.

Step 3 : Application of provisions of relating to “clubbing of income”

Step 4 : Set off past losses

Step 5 : Calculation of estimated gross total income

Step (2) + step (3) – step(4)

Step 6 : Claiming of estimation deduction ( u/s 80C to 80 U)

Step 7 : Calculation of estimated total income ( step 5 – step 6)

Step 8 : Calculation of estimated tax on total income including surcharge ( if applicable ) and education cess.

Step 9 : Claiming deduction of estimated “tax deduction or collected at sources”

Step 10 : Finding estimated net tax as (step 8 – step 9)

• Section (210) : payment of advance tax

# payment of advance tax by assessee on his own

.*(section 210(1))-It is duty of every assessee to pay advance tax .

*(Section 210 (2))- Change in amount of instalment if there is any change in estimated current income.

# payment of advance tax on the order of assessing officer( section 210(3))

* In case assessing officer is of the opinion that an assessee has already been assessed by way of regular assessment in previous years.

* If assessee not pay advance tax.

* Order in the writing form

* Not later than last day of February

# amendment of order for payment of advance tax (section 210(4))

Assessee filed return u/s 139(1) or 142(1) or regular assessment is made for p.y - before 1st marh

# assessee to intimate for reduction / increase in advance tax (section 210(5))

If advance tax paid is less than actual advance tax amount.

(section 211) : instalment of advance tax

Table ( companies and non companies not covered u/s 44AD or 44ADA )

# Section ( 211B ) : assessee covered u/s 44AD or 44ADA

Pay in one instalment on or before 15^th March of financial year

• Section ( 234A) : interest for defaults in furnishing return of income

# Liable to pay interest at 1% p.m or part of month

# Period – immediately after due date and ending on date of actual filling return.

For example :

A have tax outstanding of 200000 ,A fail to filling return on 31 July or due date , he fill return on 15^th September . So A is liable to pay interest.

. Interest =200000*1%*2= 4000

• Section ( 234B) : interest on default in payment of advance tax.

Conditions :- Advance tax piad less than 90% of assessed tax

Liable :- Interest at 1% p.m or part of month

Period :- 1st April following financial year up to date of payment of tax.

For example :-

Ram advance tax is 20000 on March 25 , Ram paid 12000 and balanced amount is 8000 was paid on July 15 .

Ram should paid at least 90% of 20000 that is 18000 on March 31th but he will only pay 12000 hence he have to pay interest on advance tax .

So Ram has to pay

Interest =8000*1%*4 =320

(Month from April to july)

• Section (234C) : interest on deferment of Advance tax .

A . For all assessees except assessees covered u/s 44AD or 44ADA.

Note :- If advance tax is Paid by assessee on or before 15^th June And 15^th September is not less than 12% and 36%of tax due on returned income , then assessee Shall not liable to pay interest On amount of shortfall.

For example :-

Let Ajay Tax liability for financial year 100000 it need to be piad in instalment.

Total interest need to pay =300+600+1200+500=2600

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B.for assessee covered u/s 44AD or 44ADA

If assessee Pay tax on or before 15^th March less than tax ,then assessee shall be liable to pay interest @ 1% on amount of shortfall from tax due on returned income.

• No levy of interest if shortfall in payment of advance tax is due to :-
• Capital gain
• Casual income under Section 2(24)(9)
• Income under profit and gain business or profession, in case income accrues under head for first time

• ( Section 218) : assessee deemed to be in default

if assessee fail to deposit amount of any instalment On due date which he required to pay under assessing officer Order.

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• (section 219) : credit for advance tax

Any sum ,other than a penalty or interest paid by or recovered from assessee as advance tax ,shall treat as payment of tax.