First Installment of Advance Tax is 15th June or 30th June?

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First Installment of Advance Tax is 15th June or 30th June?

New financial year 2020-21 has started with a lock down across the country & the present situation is full of uncertainty & contingency. Amidst all this, there is a liability to ensure tax compliance by way of payment of advance tax. Income tax is required to be paid by way of advance tax in installments as under:

Payment Due Date Advance Tax for Assessees other than those who are covered under section 44AD Advance Tax for Assessees who are covered under section 44AD
On or before 15 June 15% of the Net Tax Liability
On or before 15 September 45% of the Net Tax Liability
On or before 15 December 75% of the Net Tax Liability
On or before 15 March 100% of Net Tax Liability 100% of Net Tax Liability

Advance tax is payable by all categories of taxpayers be it companies, firms, societies, individuals, etc if the net tax liability (tax after TDS/TCS) for the year exceeds ₹10,000/-. However, Senior citizens who do not carry on a business or profession are exempt from the payment of advance tax.

Estimation of income & advance tax liability under the present situation will be a challenging & daunting task considering the fact that,

  1. Most of the businesses were non operational in April and May because of the lockdown.
  2. Even after lifting of the lockdown, there would be other restrictions & hurdles as to smooth running of business due to transportation, labour, cash flow etc.
  3. It is difficult to anticipate income by way of Dividend & mutual fund income. Till FY 2019-20, dividends & equity mutual fund income was exempt from tax as it was liable for dividend distribution tax. From the current financial year, these incomes are taxable in the hands of the recipient.
  4. TDS rate have been reduced to 75% of the normal applicable rates w.e.f  14.05.2020. Advance tax computation would be required by considering this new reduced TDS rate.

 15th June or 30th June now?

As discussed, the last date for payment of first installment of advance tax is due on 15th June. However, in view of the spread of pandemic COVED-19 across many countries of the world including India, Government has issued The Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020 which has relaxed the due date of all the compliance falling due between 20th March 2020 & 29th June 2020 to 30th June 2020.

The question arises, whether for the FY 2020-21, the date for payment of first installment of advance tax now will be 15th June 2020 or 30th June 2020? It may be noted that the delay in payment of advance tax even by a single day attract the interest of 3% (Though the interest is 1% per month, the interest is leviable for 3 months. Illogical it may sound, but the fact is that even the delay of a single day would result in levy of interest of 3%. In short, one has to be very careful while making a payment of advance tax.

Section 3(1) of Chapter II of the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020 has extended the date of compliances to 30th June. However, section 3(2) thereto reads as under:

 (2) Where any due date has been specified in, or prescribed or notified under, the specified Act for payment of any amount towards tax or levy, by whatever name called, which falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020 or such other date after the 29th day of June, 2020 as the Central Government may, by notification, specify in this behalf, and such amount has not been paid within such date, but has been paid on or before the 30th day of June, 2020, or such other date after the 30th day of June, 2020 as the Central Government may, by notification, specify in this behalf, then, notwithstanding anything contained in the specified Act,‑

(a) the rate of interest payable, if any, in respect of such amount for the period of delay shall not exceed three-fourth per cent for every month or part thereof;

(b) no penalty shall be levied and no prosecution shall be sanctioned in respect of such amount for the period of delay.

Explanation – For the purposes of this sub-section, “the period of delay” means the period between the due date and the date on which the amount has been paid.

An analysis of above ordinance signifies that blanket extension is only for compliances & not for payment of the taxes. Above ordinance provides as under:

  1. As far as the compliance with the notices, submissions, etc are concerned; the date is extended invariably to 30th June without any penal consequences.
  2. Where the payment of tax is involved, then interest will be leviable, though at a concessional rate of 0.75%. [It may be recalled here that the due date for payment of TDS was 30th April only and the delay in payment of such TDS has also attracted interest].

Conclusions:

To conclude, if the payment is not done by 15th June, interest will be leviable at 2.25% (as against 3% otherwise applicable) for the shortfall of this first installment of advance tax. Considering the present status of the economy and difficulty involved in the estimation and payment thereof, it would be better if the Government suitably extends & merge the due date of payment of first & second installment of advance tax with the 3rd Installment.

 [Readers may forward their feedback & queries at nareshjakhotia@gmail.comOther articles & response to queries are available at www.theTAXtalk.com]

 

1 Comment

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