All about Provision Related to Advance Tax: Frequently Asked Questions (FAQ)

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All about Provision Related to Advance Tax: Frequently Asked Questions (FAQ)

Is there any compliance if an assessee revises its estimate of income for advance tax?

​​An assessee can revise the estimation of income and pay the taxes accordingly without any requirement of filing the estimation of income with the department.​

 Can estimate of income be revised for the purpose of advance tax?

​In case the assesee wants to revise the estimate of income after making payment of first/ second instalment of advance tax, the assesse can revise the remaining instalment of advance tax in accordance with his revised es​timate of current income and pay the advance tax accordingly.​

What will be the due date for the payment of advance tax if the same is payable by virtue of an order from the Assessing Officer/ Income Tax Officer?

Who is not required to pay Advance tax?

  • ​​​​​A resident senior citizen(i.e., an individual of the age of 60 years or above during the financial year) not having any income from business or profession is not liable to pay advance tax.
  • Taxpayer who opted for presumptive taxation scheme of section 44AD or section 44ADA is liable to pay 100% of advance tax by 15th March.

Can I claim the deduction of Advance tax payments against my profits?

Advance Tax is not an expense. It is considered as an asset and adjusted against one’s tax liabilities at the time of finalization of the Balance Sheet. It is a charge on income and not considered as an expenditure. It is shown under Loans and Advances in the Balance Sheet.​

How do advance tax paid get reflected in Form 26AS?

​Once the Advance Tax is paid, it will be reflected on assessee’s Form 26AS within 3-4 working days of making the payment. The banks upload challan details to TIN in 3 working days after the realization of the tax payment online. After the bank uploads the details of self -assessment/advance tax to TIN, it is automatically posted into assessee’s Form 26AS.

What should be kept in mind while making payment of tax ?

​While making payment of tax, apart from other things, one should clearly mention following details :

  • Head of payment, e., Corporation Tax/Income-tax (other than companies)
  • Amount and mode of payment of tax
  • Type of payment [e.,Advance tax/Self-assessment tax/Tax on regular assessment/Tax on Dividend/Tax on distributed Income to Unit holders/Surtax]
  • Assessment year – this is a general error that assessees commit as AY is different from Financial year
  • The unique identification number called as PAN [Permanent Account Number] allotted by the IT Department.
  • The details are displayed on screen and should be confirmed before proceeding with payments.​How to compute advance tax on capital gains income?

Advance tax is payable on total income which includes capital gains and casual income (i.e., income from lotteries, crossword puzzles, etc.).

However, it is practically not possible to estimate the income from capital gain and casual income in advance. Therefore, in such cases it is provided that if any such income arises after the due date of any instalment, then the tax calculated on capital gain and casual income shall be paid in remaining instalments of advance tax which are due.

If the entire amount of tax is so paid then no interest for late payment is levied.

 In case of advance tax, when is assesse considered as assesse-in-default?

​​For the purpose of advance tax, an assesse will be considered as assesse-in-default if he:-

  1. does not pay the advance tax on receiving the order from Income-tax officer as per the due dates, or
  2. does not file an intimation in Form 28A before the instalment due date.

What should we do if the bank is closed on the last day for payment of advance tax?​​

​​Any taxes paid till 31st March will be treated as advance tax. If the last day for the payment of advance tax is the day on which the banks are closed, then one should pay the advance tax on the immediately following working day and no interest shall be charged on such payments of advance tax.

​ Note: The CBDT vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 ​dated 31-03-2020 has extended all respective due dates, falling during the period from 20-03-2020 to 29-06-2020, till June 30, 2020.

The benefit of extended due date shall not be available in respect of payment of tax. However, any delay in payment of tax which is due for payment from 20-03-2020 to 29-06-2020 shall attract interest at the lower rate of 0.75% for every month or part thereof if same is paid after the due date but on or before 30-06-2020.

Does credit of TDS allowed while calculating advance tax?

​​​​​​As per section 208 of the income-tax Act, 1961, every person whose estimated tax liability for the year is INR 10,000 or more, after TDS (taxes deducted at source), shall pay advance tax.

Therefore, credit of TDS is to be taken while calculating the advance tax liability.

However, if the amount is given or credited by payer without deduction of tax then the benefit of TDS cannot be given while calculating the advance tax liability.

Who is responsible to file Form 28A?

​In case  the Assessing Officer’s estimation of current income is more than the assesse’s estimate then the assessee is required to file an intimation in Form no. 28A giving estimate of income and advance tax.

The estimation is required to be filled and signed by a person who is authorized to sign a return of income.

  • In case of a registered firm, the firm has to submit the estimate of advance tax payable, if any.
  • The individual partnershave also to submit an estimate of the advance tax payable by eachpartner including therein the share of income from the registered partnership firm.​
  • In case of an HUF, which has no member and whose total income of the previous year is likely to exceed the maximum amount not chargeable to income-tax then a declaration is required to be filed from all members.​

 

What is Form 28A?

​In case the Assessing Officer’s estimation of current income is more than the assesse’s estimate then he is required to send an intimation in Form no. 28A giving estimate of such reduced income and advance tax.

The form is prescribed under Rule 39 of the Income-tax Rules (Form No. 28A).​

 What should I do on receiving the notice from income-tax department for the payment of advance tax, if my actual income is more than what is determined by the tax officer?

​Assessing Officer can serve an order requiring the assesse to pay advance tax, if he is of the opinion that such person is liable to pay advance tax.

However, if you feel that year advance tax liability is lower than the liability calculated by the income-tax officer; you may file an estimation of the income and amount of tax payable thereon

– Such information should be submitted in Form No. 28A to the Assessing Officer

– Alternatively, In case the tax demand calculated by the Income-tax officer is lower than the tax liability computed by you, you should pay the advance tax as per your own computation.

– No intimation to Income-tax officer is required to be made in such cases.

 ​Which tax rates are to be used for computing advance tax liability?

​​For computing the advance tax liability of the prevailing tax rates or the rates in force of the previous year for which the advance tax is to be computed are to be used.

When Assessing Officer is liable to determine the Advance tax liability?

  1. ​​If a taxpayer who has a legal obligation to pay advance tax fails to make payment for advance tax or advance tax is lower than the correct amount AO may pass an order asking the taxpayer to pay tax on assessee’s current year income
  2. Such order shall clearly specify the amount payable and in number of instalments the same needs to be paid
  3. Such order should be passed anytime during the previous year but before 1stMarch, i.e., by 28th February

Computation by the Assessing Officer

  1. Assessing Officer can serve an order requiring the assesse to pay advance tax if he is of the opinion that such person is liable to pay advance tax or the tax paid is lower
  2. In such cases, the Officer will take the higher of following incomesand calculate the tax as per prevailing rate of income-tax:-​

(a)The total income of the latest previous year in respect of which Officer has assessed income, i.e., the year for which an assessment has been completed by the Income-tax Officer,

or

(b)   The total income declared by the assesse in any return after the year of assessment by officer., i.e., Any income furnished by the assessee in Income-tax return for any previous year after

 What is the procedure for computing advance tax?

 ​​​Advance tax is liable to be paid in every case where the advance tax payable is Rs. 10,000 or more. A Resident Senior citizen not having any income from business/profession, is not liable to pay advance tax with effect from A.Y 2013-14 onwards.

An assessee who opts for the presumptive taxation scheme under section​ 44AD and section 44ADA is required to pay advance tax related to such business. However, advance tax can be paid during the financial year (immediately preceding to the assessment year) on or before March 15.

The computation of advance tax can be done in the following manner:

Income from salaries                                                                                             xxx

Income from house property                                                                                           xxx

Income from Capital Gains                                                            xxx

Income from Business or Profession                                         xxx

Income from other Source                                                                       xxx

Gross Total Income                                                                         xxx

Less: Deductions under sections 80C to 80U                                      xxx

Net Income                                                                                                  xxx

Income Tax on Net Income                                                                     xxx

Less: Rebate under section 87A​                                                  xxx

Balance                                                                                                       xxx

Add: Surcharge, if any                                                                              xxx

Total                                                                                                  xxx

Add: Health and Education Cess @4%                                        xxx

Total                                                                                                 xxx

Less: Relief under section 89, 90, 90A or 91                                         xxx

Less: Pre-paid taxes (i.e. advance tax,

 self -assessment tax, TDS, TCS, MAT/AMT credit)                          xxx

Advance Tax Liability                                                                             xxx

(The Advance tax calculator is available on https://incometaxindiaefiling.gov.in/)

 

 What is the due date for payment of Advance tax and Self Assessment tax?

​​​​As per section 140(1) , Payment of income-tax on self-assessment should be done by the assessee before the date of filing of return of income. The payment made after the due date of filing return of income attracts interest under section 234A.

LAST DATE FOR PAYMENT OF ADVANCE TAX

The due dates for payment of different instalments of advance tax are as follows:-

(i) For assessees (other than those covered under section 44ADA of the Income-tax Act, 1961)

On or before 15th June 15% of advance tax
On or before 15th Sept 45% of advance tax
On or before 15th Dec 75% of advance tax
On or before 15th March 100% of the advance tax

(ii) For assessees covered under section 44AD and section 44ADA (under presumptive taxation scheme) of the income-tax Act, 1961, are required to pay advance tax on or before 15th Mar

​Note: The CBDT vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, dated 31-03-2020, has extended all respective due dates, falling during the period from 20-03-2020 to 29-06-2020, till June 30, 2020.

The benefit of extended due date shall not be available in respect of payment of tax. However, any delay in payment of tax which is due for payment from 20-03-2020 to 29-06-2020 shall attract interest at the lower rate of 0.75% for every month or part thereof if same is paid after the due date but on or before 30-06-2020.

 Who is liable to pay Advance tax?

​​​​​​As per Section 208 of t​he Income Tax Act, every person (individual, firm, company, etc.) whose estimated tax liability for the year (i.e., for the year in progress such as FY 2016-17, FY 2017-18,  etc.) after TDS (i.e., TDS which is deducted for the person by its payers/clients/banks, etc.) is Rs. 10,000 or more shall pay its tax for the year in advance during the same financial year Such tax shall be paid in instalments Individuals, having only salary income are not required to pay advance tax as the liability to deduct and deposit tax is on the employer making such payment in the form of TDS​

 Can payment of advance tax be made through any bank account?

It is not necessary to make the payment of taxes from assessee’s own account in an authorized bank. An assessee can make the payment from account of any person. However, the challan for making such payment must clearly indicate the Permanent Account Number of assesse on whose behalf the payment is made.​

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