ADVANCETAX

ADVANCE TAX INSTALLMENT CALCULATION KNOW MORE

Advance tax is also known as ‘Pay as you earn’ scheme. The tax is payable if your tax liability exceeds Rs. 10,000 in a financial year. The tax should be paid in the same year in which the income was received.

What is the Advance Tax?

Advance Tax is a part of your taxes that is to be paid before the end of the financial year. It should be paid in the year in which the income is received. That is why it is also known as the pay-as-you-earn scheme.

Who is Liable to Pay Advance Tax?

Any assessee whose tax liability is more than Rs 10,000 in a financial year is liable to pay advance tax. For ex: if your tax liability of FY 2021-22 has exceeded Rs 10,000 then you are liable to pay it in FY 20-21 itself.

Note: Senior citizen (an individual of 60 years or more) who do not have income from the business is exempted from paying advance tax. Such exemption is irrespective of the ceiling of Rs 10,000.

Who should File Advance Tax?

Advance Tax is applicable only for those who have sources of income other than Salary. The salaried person is not required to pay advance tax as the tax deduction at source (TDS) will be done by his employer. But if he has earned income from heads other than Salary, such as interest income on fixed deposit, winnings from lottery, whose tax liability exceeds Rs 10,000 then he is required to pay advance tax.

What is the Logic behind Advance Tax?

Advance Tax helps the government to receive a regular flow of income throughout the year so that it doesn’t have to wait until the end of the year to incur any expenditure. This approach keeps the government going.

How to Calculate Advance Tax Liability?

Tax liability is calculated by estimating the current year income and then applying the tax rates applicable as per Income Tax Slabs.

Let’s Understand with the Help of An Example:

Suppose the total tax on the estimated income of the financial year 2021-22 is 20,000 (which is clearly more than Rs. 10,000 so advance tax has to be paid).

Entire Rs 20,000 has to be paid as advance tax, but in instalments, as follows:

  • 1st instalment by 15th June, 2021 (15% of 20,000) = Rs 3,000
  • 2nd instalment by 15th Sept, 2021 (45% of 20,000) = Rs 6,000
  • 3rd instalment by 15th Dec, 2021 (75% of 20,000) = Rs 6,000
  • 4th instalment by 15th March, 2022 (100% of 20,000) = Rs 5,000

Note:

  • For delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between 20th March 2020 and 30th June 2020, reduced interest rate at 9% instead of 12 %/18 % per annum ( i.e. 0.75% per month instead of 1/1.5 percent per month) will be charged for this period. No late fee/penalty shall be charged for delay relating to this period. Read More
  • In the above example if you re-estimate your income, then you should revise the advance tax accordingly. You can also calculate Advance Tax using online advance tax calculator:
    http://www.incometaxindia.gov.in/Pages/tools/advance-tax-calculator.aspx
  • “In view of the recent disturbances in the North Eastern region of India, CBDT has decided to extend the date for payment of 3rd instalment of Advance Tax for FY (financial year) 2019-20 from 15th December, 2019 to 31st December, 2019 for the North Eastern Region,” the Central Board of Direct Taxes (CBDT) said in a statement.

What are the Due Dates of Advance Tax Payment?

(For both Corporate & non-Corporate Assessee)

Due Dates Rates of Advance Tax
On or before 15th JuneUp To 15% of the advance tax liability
On or before 15th SeptemberUp To 45% of the advance tax liability
On or before 15th DecemberUp To 75% of the advance tax liability
On or before 15th March100% of the advance tax liability

Earlier the percentage of Advance Tax to be paid was different for companies and other than companies, But now Budget 2016 has standardized the rates for both the assessee.

Advance Tax Interest:

Interest U/s 234C:

Where in any financial year an assessee, other than the assessee declaring income under presumptive taxation who is liable to pay advance tax has failed to pay such tax or the advance tax paid by such assessee on its current income on or before the 15th day of June is less than 15% of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than 45% of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than 75% of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of 1% percent per month for a period of three months on the amount of the shortfall from 15% or 45% or 75%, as the case may be, of the tax due on the returned income.

If the advance tax paid by the assessee on the current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of 1% percent on the amount of the shortfall from the tax due on the returned income:

If the advance tax paid by the assessee on the current income, on or before the 15th day of June is not less than 12% or the 15th day of September is not less than , 36% of the tax due on the returned income, then, the assessee shall not be liable to pay any interest on the amount of the shortfall on those dates

An assessee who declares profits and gains under section 44AD or section 44AD, as the case may be whose tax liability is more than Rs.10,000 and has failed to pay such tax or the advance tax paid by the assessee on its current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate
of 1% percent on the amount of the shortfall from the tax due on the returned income

Interest under Section 234B

What happens if you fail to pay advance tax on due dates?

If you miss the deadlines for the advance tax payment

  • You did not pay any advance tax even if your tax liability for the financial year is more than Rs 10,000
  • You have paid the advance tax but the paid amount is less than 90% of the assessed tax.

In any one of the cases, interest under Section 234B shall be applicable.

Interest is calculated @ 1% per month from 1st April on Assessed Tax less Advance Tax already deposited.

Three Easy Methods to Pay Advance Tax

Offline Mode:

Individuals may pay advance tax using tax payment challans at bank branches authorised by the Income Tax Department. Such authorised banks for the income tax payment are Reserve Bank of India, State Bank of India, HDFC Bank, Indian Overseas Bank, ICICI Bank, Indian Bank, Allahabad Bank, Syndicate Bank, Axis Bank, Punjab National Bank, Punjab & Sindh Bank and more.

Online Mode:

Advance Tax can also be paid online through the official website of the Income Tax department: https://www.incometaxindiaefiling.gov.in/.

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