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Advance Tax

Advance tax (AT) is the income tax payable by an assessee if your tax liability is 10,000 or exceeds it in a financial year and to be paid in the year in which income is to be received, income here means income derived through the sources other than salary. If you are a salaried employee, your employer is required to deduct tax at source (TDS) on your salary income however if you have income from other sources such as income from rent, capital gain on shares or sale of immoveable property, interest on fixed deposits or saving bank accounts, winnings from lottery or races, you are required to pay the AT like other categories of tax payers. Salaried employees also have an option to declare the income from other sources to the employer and get the tax deducted in the form of TDS. By doing this, they can avoid making payment of AT.

Coverage

  • What is the due date of payment of Advance Tax?
  • What is the interest payable on non-payment of advance tax?
  • How to compute advance tax as per income tax act, 1962?

 

What is the due date of payment of AT?

Due date of installment (on or before) All assessees (other than covered in u/s 44AD or 44ADA) Tax payers who opted for taxation scheme of section 44AD and 44ADA.
15th June Upto 15% of the tax liability Nil
15th September Upto 45% of the tax liability as reduced by amount, if any paid in the earlier installment. Nil
15th December Upto 75% of the tax liability as reduced by amount, if any paid in the earlier installment Nil
15th March The whole amount of tax liability as reduced by by amount, if any paid in the earlier installment Upto 100% of the tax.

Note:  Assessees covered u/s 44AD & u/s 44ADA are to pay tax of the whole amount in one instalment on or before the 15th March of the financial year, A senior citizen ( i.e. the individual who has attained the age of 60 years) not having any income from business and profession is not liable to pay advance tax.

 

What is the interest payable on non-payment of advance tax?

Section 234A – simple interest @ 1% per month is applicable till the time the taxes are paid and the return is filed, if return is filed after the due date, on the tax determined under section 143(1) or on regular assessment as reduced by TDS, AT or tax relief if any.

Section 234 B – In case AT paid is less than 90% of the assessed tax, simple interest @ 1% per month is applicable under from 1 April following the financial year till the month when the taxes are actually paid or processing under section 143(1) or on regular assessment as reduced by TDS, AT or tax relief if any.

Section 234 C – For deferment of AT, in case where the advance tax is paid, if advance tax paid till 15th September is less than 30% of advance tax payable, simple interest @ 1% for a period of 3 months is applicable, on the tax determined under section 143(1) or on regular assessment as reduced by TDS, advance tax or tax relief if any. Same if the tax payable on or before 15th December is less than 60% of tax due.

However, in case of last installment payable on 15 March, the interest is payable @ 1% per month for 1 month.

 

How to compute advance tax as per income tax act, 1962?

Income under 5 heads of income-

Less: brought forward losses and allowances

Less: deductions under chapter VI A

ESTIMATED TOTAL INCOME

Tax on Total Income

Add: surcharge

Less: relief under section 89

TAX LIABILITY

Add: 4% Higher secondary and education cess

TOTAL TAX LIABILITY

Less: relief of tax under section 90, 90A & 91

Less: MAT credit

Less: TDS shown in form 16 or in form 26 AS

ADVANCE TAX LIABILITY

 

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