Concept of Advance Tax

Introduction: According to sections 208 of the Income tax Act 1961, tax shall payable in advance during the financial year in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year. In this article I would like to brief about the concept of advance tax.

 

1. When the advance tax  liability arise:

 

Advance tax liability arises when the projected total income of an assessee which includes all the heads like Salary, House property, business income, capital gain and other sources exceeds the exemption limit and tax liability exceeds Rs. 10, 000. (With effect from financial year 2009-10, previously limit was Rs. 5000.

 

2. Due date of  advance tax and payment:

 

Due dates	For Corporate Assessee	For Non corporate Assessee
On or before June 15th of the previous year	Up to 15 % of advance tax payable	___
On or before September 15th of the previous year	Up to 45 % of advance tax payable	Up to 30 % of advance tax payable
On or before December 15th of the previous year	Up to 75 % of advance tax payable	Up to 60 % of advance tax payable
On or before March 15th of the previous year	Up to 100 % of advance tax payable	Up to 100 % of advance tax payable

 

Apart from above, any income tax payment made on or before 31^st March of the previous year also treated as advance tax.

 

3. TDS/TCS need to be considered :

 

While calculating the percentage of advance tax payment as per the above table, we shall consider the tax deductible or collectible at source and need to deduct the TDS/TCS from the assessed tax.

 

4. How the advance payment can be made:

 

Advance tax payment can be deposited through challan no.280 in banks. But all corporate assessee and the assessee those are subject to compulsory audit u/s.44AB need to deposit tax through electronic payment mode as per department circular no.5/2008 dated: 17.7.2008.

 

5. Specific exemption from payment of advance tax:

 

An assessee who opted for the scheme of computing business income u/s.44AD on presumptive basis at the rate of 8% of turnover, shall be exempted from the payment of advance tax related to such business with effect from assessment year 2011-12.

 

6. Consequences for nonpayment of Advance tax:

 

Interest will attract as per section 234A for default of payment of advance tax as follows:

Interest applicability	Amount on which interest applicable	Rate of Interest	Period for which interest payable
An assessee  who has failed to pay advance tax	Interest payable on assessed tax	Simple Interest at 1% for every month or part of month	From the 1st April of the assessment year to the date of  determination of  income under sec.143(1) and  where a regular assessment is made to the date of such assessment
An assesseee paid advance tax but  tax amount paid is less than 90% of assessed tax	Assessed tax less advance tax paid during the year	Simple Interest at 1% for every month or part of month	From the 1st April of the assessment year to the date of  determination of  income under sec.143(1) and  where a regular assessment is made to the date of such assessment

 

Also interest will attract as per section 234C for nonpayment of advance tax or under estimation of advance tax installments. Interest rate will be 1% simple interest per month on the difference amount