Advance Payment of Tax [Sections 207 to 219]
Liability for payment of advance tax
(1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219, in respect of an assessee’s current income i.e. the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year [Section 207].
(2) Under section 208, obligation to pay advance tax arises in every case where the advance tax payable is ` 10,000 or more.
An assessee who is liable to pay advance tax of less than ` 10,000 will not be saddled with interest under sections 234B and 234C for defaults in payment of advance tax. However, the consequences under section 234A regarding interest for belated filing of return would be attracted.
(3) In case of senior citizens who have passive source of income like interest, rent, etc., the requirement of payment of advance tax causes genuine compliance hardship. Therefore, in order to reduce the compliance burden on such senior citizens, exemption from payment of advance tax has now been provided to a resident individual-
(1) not having any income chargeable under the head “Profits and gains of business or profession”; and
(2) of the age of 60 years or more. Such senior citizens need not pay advance tax and are allowed to discharge their tax liability (other than TDS) by payment of self-assessment tax.
Computation of advance tax
(1) An assessee has to estimate his current income and pay advance tax thereon. He need not submit any estimate or statement of income to the Assessing Officer, except where he has been served with notice by the Assessing Officer.
(2) Where an obligation to pay advance tax has arisen, the assessee shall himself compute the advance tax payable on his current income at the rates in force in the financial year and deposit the same, whether or not he has been earlier assessed to tax.
(3) In the case of a person who has been already assessed by way of a regular assessment in respect of the total income of any previous year, the Assessing Officer, if he is of the opinion that such person is liable to pay advance tax, can serve an order under section 210(3) requiring the assessee to pay advance tax.
(4) For this purpose, the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment or the total income returned by the assessee in any return of income for any subsequent previous year, whichever is higher, shall be taken as the basis for computation of advance tax payable.
(5) The above order can be served by the Assessing Officer at any time during the financial year but not later than the last date of February.
(6) If, after sending the above notice, but before 1st March of the financial year, the assessee furnishes a return relating to any later previous year or an assessment is completed in respect of a later return of income, the Assessing Officer may amend the order for payment of advance tax on the basis of the computation of the income so returned or assessed.
(7) If the assessee feels that his own estimate of advance tax payable would be less than the one sent by the Assessing Officer, he can file estimate of his current income and advance tax payable thereon.
(8) Where the advance tax payable on assessee’s estimation is higher than the tax computed by the Assessing Officer, then, the advance tax shall be paid based upon such higher amount.
(9) In all cases, the tax calculated shall be reduced by the amount of tax deductible at source.
No reduction of ‘tax deductible but not deducted’ while computing advance tax liability
(i) As per the provisions of section 209, the amount of advance tax payable by a person is computed by reducing the amount of income-tax which would be deductible at source during the financial year from any income which has been taken into account in computing the total income.
(ii) Some courts have opined that in case where the payer pays any amount (on which tax is deductible at source) without deduction of tax at source, the payee shall not be liable to pay advance tax to the extent tax is deductible from such amount.
(iii) With a view to make such a person (payee) liable to pay advance tax, the proviso to section 209(1)(d) provides that the amount of tax deductible at source but not so deducted by the payer shall not be reduced from the income tax liability of the payee for determining his liability to pay advance tax.
(iv) In effect, only if tax has actually been deducted at source, the same can be reduced for computing advance tax liability of the payee. Tax deductible but not so deducted cannot be reduced for computing advance tax liability of the payee.
(10) The amount of advance tax payable by an assessee in the financial year calculated by -
(i) the assessee himself based on his estimation of current income; or
(ii) the Assessing Officer as a result of an order under section 210(3) or amended order under section 210(4) is subject to the provisions of section 209(2), as per which the net agricultural income has to be considered for the purpose of computing advance tax.
Installments of advance tax
(1) Advance tax shall be payable schedule of installments:
Companies - Four installments
Due date of installment
On or before the 15th June
On or before the 15th September
On or before the 15th December
On or before the 15th March
Non-corporate assessees - Three Due date of installment
On or before the 15th September On or before the 15th December
On or before the 15th March
and due dates by companies and other assessees as per the following Amount payable
- Not less than 15% of advance tax liability.
- Not less than 45% of advance tax liability, as reduced by the amount, if any, paid in the earlier installment.
- Not less than 75% of advance tax liability, as reduced by the amount or amounts, if any, paid in the earlier installment or installments.
The whole amount of advance tax liability as reduced by the amount or amounts, if any, paid in the earlier installment or installments.
installments Amount payable
- Not less than 30% of advance tax liability
- Not less than 60% of advance tax liability, as reduced by the amount, if any, paid in the earlier installment.
- the whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier installment or installments.
(2) The last date for payment of the whole amount of advance tax is 15th March of the relevant financial year. However, any amount paid by way of advance tax on or before 31st March is also considered as advance tax paid for the financial year. Interest liability for late payment will arise in such a case.
(3) If the last day for payment of any installment of advance tax is a day on which the receiving bank is closed, the assessee can make the payment on the next immediately following working day, and in such cases, the mandatory interest leviable under sections 234B and 234C would not be charged.
(4) Where advance tax is payable by virtue of the notice of demand issued under section 156 by the Assessing Officer, the whole or the appropriate part of the advance tax specified in such notice shall be payable on or before each of such due dates as fall after the date of service of notice of demand.
(5) Where the assessee does not pay any installment by the due date, he shall be deemed to be an assessee in default in respect of such installment.
Payment of advance tax in case of capital gains/casual income [Proviso to section 234C]
(1) Advance tax is payable by an assessee on his/its total income, which includes capital gains and casual income like income from lotteries, crossword puzzles etc.
(2) Since it is not possible for the assessee to estimate his capital gains, income from lotteries, etc., it has been provided that if any such income arises after the due date for any installment, then, the entire amount of tax payable (after considering tax deducted at source) on such capital gains or casual income should be paid in the remaining installments of advance tax which are due.
(3) Where no such installment is due, the entire tax should be paid by 31st March of the relevant financial year.
(4) No interest liability would arise if the entire tax liability is so paid.
Note: In case of casual income (winnings from lotteries, crossword puzzles, card games, gambling, betting, races including horse races etc.), the entire tax liability is fully deductible at source@30% under section 194B and 194BB. Therefore, advance tax liability would arise only in respect of the education cess and secondary and higher education cess element of such tax, if the same, along with tax liability in respect of other income, if any, is ` 10,000 or more.
Credit for advance tax [Section 219]
Any sum, other than interest or penalty, paid by or recovered from an assessee as advance tax, is treated as a payment of tax in respect of the income of the previous year and credit thereof shall be given in the regular assessment.
Interest for non-payment or short-payment of advance tax [Section 234B]
(1) Interest under section 234B is attracted for non-payment of advance tax or payment of advance tax of an amount less than 90% of assessed tax.
(2) The interest liability would be 1% per month or part of the month from 1st April following the financial year upto the date of determination of income under section 143(1).
(3) Such interest is calculated on the amount of difference between the assessed tax and the advance tax paid.
(4) Assessed tax is the tax calculated on total income less tax deducted at source.
Interest payable for deferment of advance tax [Section 234C]
(1) Interest under section 234C is attracted for deferment of advance tax beyond the due dates.
(2) The interest liability would be 1% per month, for a period of 3 months, for every deferment.
(3) However, for the last installment of 15th March, the interest liability under this section would be 1% for one month.
(4) The interest is to be calculated on the difference between the amount arrived at by applying the specified percentage of tax on returned income and the actual amount paid by the due date.