In this article, we will discuss the “Advance Tax”, Payment of advance Tax, Let’s Start:
- Advance tax is an “Income Tax” that should be paid in advance, as the name suggests “Advance Tax”. It is also termed as “Pay as you earn“.
- Provisions relating to Advance Tax Payment are governed by section 207 to 219 of the Income Tax Act, 1961.
As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of “advance tax”.
- Generally,every person whose estimated tax liability for the year is Rs. 10,000 or more is liable to pay advance tax.
- But for providing relief to Resident Senior Citizens who have passive source of income like rent, interest etc., the requirement for payment of advance tax causes genuine compliance of hardship.
- Conditions:
- A Resident Senior Citizen (i.e., an individual of the age of 60 years or above during the relevant financial year);
And
- Not having any income from business or profession
Advance tax is to be paid in different instalments. The due dates for payment of different instalments of advance tax are as follows:
Status | On or Before | |||
15th June | 15th Sept. | 15th Dec. | 15th March | |
All assessees (other than the eligible assessee as referred to in Section 44AD or section 44ADA) | Minimum 15% of advance tax | Minimum 45% of advance tax | Minimum 75% of advance tax | Minimum 100% of advance tax |
Taxpayers who opted for presumptive taxation scheme of section 44AD or section 44ADA | Nil | Nil | Nil | Minimum 100% of Advance tax |
Note 1: Any tax paid till 31st March will be treated as advance tax.
Note 2: If the last day for Payment of any installment of advance tax is a day on which the banks are closed, then the tax payer should pay advance tax on the immediately following working day [Circular No. 676, dated 14-1-1994].
Example 1
Mr. Dinesh is a doctor. Although Mr. Dinesh is in a profession specified under section 44AA(1) but he doesn’t opt for presumptive taxation of the scheme of section 44ADA. Compute the amount of advance tax to be paid by Mr. Dinesh ( age 50 years) from the following details provided by him (for the year 2020-21):
- Gross business receipts Rs. 30,00,000.
- Allowable expenses Rs. 18,00,000.
- Interest from fixed deposit Rs. 8,000.
- Deduction u/s 80c PPF Rs. 50,000 and LIC Rs. 30,000.
- Deduction u/s 80D Rs. 10,000.
Computation of ( Estimated ) taxable income and tax liability of Mr. Dinesh for the year 2020-21:
Estimated Income for Advance Tax | Amount (₹) | Amount(₹) |
Income from Profession: | ||
Gross Receipts | 30,00,000 | |
Less: Allowable Expenses | 18,00,000 | 12,00,000 |
Income from Others Sources: | ||
Interest from Fixed Deposit | 8,000 | |
GROSS TOTAL INCOME | 12,08,000 | |
Less: Deduction under Chapter VI-A | ||
Under Section 80C | ||
Contribution to PPF | 50,000 | |
LIC Premium | 30,000 | |
80,000 | ||
Deduction under 80D | 10,000 | 90,000 |
TOTAL INCOME | 11,18,000 | |
TAX PAYABLE | 1,47,900 | |
Add: Health & Education Cess @ 4% | 5,916 | |
53,816 | ||
TAX PAYABLE IN ADVANCE | 1,00,000 |
Mr. Dinesh is being a doctor is in profession specified under section 44AA(1) but he doesn’t opt for the presumptive taxation scheme of section 44ADA. Hence, he has to pay advance tax in installments as under :
Advance Tax Payments | ||
Due Date | Advance Tax Payable | Amount(₹) |
15th June | 15 % of Advance Tax | 15,000 i.e (1,00,000 * 15%) |
15th September | 45% of Advance Tax less advance tax already paid | 30,000 i.e [ (1,00,000*45%) i.e 45,000 – 15,000 already paid ] |
15th December | 75% of Advance Tax less advance tax already paid | 30,000 i.e [( 1,00,000*75%) i.e 75,000 – (15,000 + 30,000) already paid ] |
15th March | 100% of Advance Tax less advance tax already paid | 25,000 i.e [ (1,00,000*100%) – (15,000+30,000 +30,000) already paid] |
Example 2
Compute the amount of advance tax to be paid by Mr. Ram Lal ( age 50 years) from the following details provided by him (for the year 2020-21):
- Taxable business receipts Rs. 10,84,000.
- Interest on debenture Rs. 9,000 (after deduction of tax at source of Rs. 1,000).
- Investment in NSC during the year Rs. 80,000.
- He has paid tuition fees of his son of Rs. 1333.
Computation of (Estimated) taxable income and tax liability of Mr. Ram Lal for the year 2020-21:
Estimated Income for Advance Tax | Amount | Amount |
Profits and gains of business or profession | 10,84,000 | |
Income from Other Sources ( Rs. 9,000 net interest + TDS of Rs. 1,000 ) | 10,000 | |
GROSS TOTAL INCOME | 10,94,000 | |
Less: Deduction under Chapter VI-A | ||
U/s 80C:
| 80,000 1,333 | 81,333 |
TOTAL INCOME | 10,12,667 | |
Tax Payable | 1,16,300* | |
Add: Health and Education Cess @ 4% | 4,652 | |
Tax Liability before TDS | 1,20,952 | |
Less: Tax Deducted at Source | 1,000 | |
Tax Liability after TDS | 1,19,952 |
| Advance Tax Payments | ||
| Due Date | Advance Tax Payable | Amount(₹) |
| 15th June | 15% of Advance Tax | 17,993 |
| 15th Sept. | 45% of Advance Tax less advance tax already paid | 35,985 |
| 15th Dec. | 75% of Advance Tax less advance tax already paid | 35,985 |
| 15th March | 100% of Advance Tax less advance tax already paid | 29,988 |
| Total | 1,19,950 | |
As per Rule 125 of the Income Tax Rules, 1962:
- A corporate taxpayer (i.e., company) shall pay taxes through electronic payment mode using the internet banking facility of authorized banks.
- Taxpayer other than a company, who are required to get their accounts audited, shall pay taxes through the electronic payment mode using the internet banking facility of authorized banks.
- Any other taxpayer can pay tax either electronic mode or by physical mode i.e. by depositing the challan at the receiving bank.
In this video, we will see how to make advance tax payments.
Source
Finance Act, 2020
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