Advance Tax at a Glance

The word “Advance” itself explained its meaning and purpose. For Central Government is it a pre-paid taxes paid by the assessee. Such advance tax is in addition to deduction of tax at source or collection of tax at source. It is also known as “Pay as you Earn” scheme i.e., the assessee is required to pay tax during the course of earning of income in the previous year itself, though such income is chargeable to tax during the assessment year.

Applicability of Advance Tax:

Advance Tax,  Tax should be computed in accordance with the provisions of Income tax provision which is payable during a financial year, It is required to be paid only when the amount of such advance tax payable by the assessee during that year is `10,000 or more.

Exemption from above provision:

The provisions of advance tax shall not apply to an individual resident in India, who–

• does not have any income chargeable under the head “Profits and gains of business or profession; and
• is of the age of sixty years or more at any time during the previous year.

20.3 Computation and Payment of Advance Tax where the calculation is made by the assessee himself [Section 209(1) (a) and (d)]

The amount of advance tax payable by an assessee in the financial year on his own accord as per section 210(1) or 210(2) or 210(5) or section 210(6) on the estimated current income shall be computed as follows:

Step	Particulars	Amount
Step I	Estimate the current income of the financial year for which the advance tax is payable.	XXX
Step II	Compute tax on such estimated current income at the rate(s) of taxes	XXX
Step III	Add: surcharge if applicable	XXX
Step IV	Add education cess & SHEC to the amount computed under step IV	XXX
Step V	Allow relief, if any, under section 89, 90, 90A & 91.	(XXX)
Step VI	Deduct: credit, if allowable, under section 115JAA (MAT credit) or 115JD (AMT credit) of the tax paid in earlier years	(XXX)
Step VII	Deduct: the tax deductible or collectable at source during the financial year from any income	(XXX)
Step VIII	The balance amount is the advance tax payable provided it is `10,000 or more	XXX

 

Note: Agricultural income forms part of current income for computing advance tax on non-agricultural income.

Manner of Payment of Advance Tax:

Due date of instalments of advance tax payable by all assessees other than covered under section 44AD or 44ADA [Section 211(1) (a)]:

 

Due date of instalment	Amount payable
On or before the 15th June	Not less than fifteen per cent. of such advance tax.
On or before the 15th September	Not less than forty-five per cent of such advance tax, as reduced by the amount, if any, paid in the earlier instalment.
On or before the 15th December	Not less than seventy-five per cent. of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments.
On or before the 15th March	The whole amount of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments;

 

• Advance tax payable by the assessee covered under section 44AD or 44ADA [Section 211(1) (b)]: An eligible assessee in respect of an eligible business referred to in section 44AD or 44ADA shall pay the advance tax, to the extent of the whole amount of such advance tax during each financial year on or before the 15th March.

 Note: Although, last date of payment of whole amount of advance tax is 15th March of the relevant financial year, but any amount paid by way of advance tax on or before the 31st March shall also be treated as Advance Tax paid for that financial year. The assessee will, however, be liable to pay interest on the late payment. [Proviso to section 211(1) ] 

Special Provision for Payment of advance tax in case of capital gains/casual income [Proviso to section 234C]

Advance tax is payable on all types of income, including capital gains and winnings of lotteries, crossword puzzles, etc. However, it is not normally possible for an assessee to estimate the following incomes:

(i) the amount of capital gains; or

(ii) winnings from lotteries, etc.; or

(iii) income under the head “business or profession” in cases where the income accrues and arises under the said head for the first time as the business might have been started after certain due dates of payment of advance tax; or

(iv) income of the nature referred to in section 115BBDA(1) i.e. the dividend received is in excess of ` 10,00,000.

Therefore, in such cases, it is provided that if any such income arises after the due date of any instalment, then, the entire amount of tax payable (after deduction of tax at source, if any), on such capital gain or winnings from lotteries, etc. or income from business or profession or income from dividend, should be paid in remaining instalments of advance tax which are due or where no such instalment is due, by 31st March of the relevant Financial Year. If the entire amount of tax payable is so paid, then no interest on late payment will be leviable.

Deduction of Credit for 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.