Advance payment of Tax

This article is in form of Question and Answer to have an overview of the topic  “Advance Payment of Tax ”

 

Which Sections are applicable of Income Tax Act, 1961

Section 207 to 219

What is Advance tax?

It is a form of pre-paid tax system or known as ‘pay as you earn’ scheme. Advance tax is payable on current income in installment during the previous year incomes.

Tax is payable in advance during the financial year in respect of the total income of the assessee1 which would be chargeable to tax for the assessment year immediately following the financial year.

Whom it is collected by?

It is collected by the Central Government of India.

What total income (current income) comprise of?

Current income will include all items of income including capital gain whether long term or short term, or income from other sources such as winning from lotteries etc.

While calculating advance tax on the current non-agricultural income, the agriculture income will also be 

Who shall pay advance tax ?

The computed advance tax shall be payable during a financial year, only when the amount of such advance tax payable by the assessee during that year is Rs. 10,000 or more.

Who is exempt from payment of Advance tax

  1. Senior Citizens above age 60 years are not required to pay advance tax, if they do not have income from business or profession.
  2. Assessee carrying on a business referred to in section 44AD i.e. presumptive taxation. Advance shall not be required to pay for the income related to such business.

When it is to be paid?

In case of non company assessee advance tax is to be paid in three installments

Due Date of installments

Advance Tax payable

on or before 15th September.

Not less than 30% of advance tax liability.

on or before 15th December.

Not less than 60% of advance tax liability less advance tax already paid.

on or before 15th March.

100% of advance tax liability for the year less advance tax already paid.

In case of company assessee advance tax is to be paid in four installments

Due Date of installments

Advance Tax payable

On or before the 15th June

Not less than 15% of advance tax liability.

On or before the 15th September

Not less than 45% of advance tax liability less advance tax already paid.

On or before the 15th December

Not less than 75% advance tax liability less advance tax already paid.

On or before the 15th March

100% of advance tax liability for the year less advance tax already paid.

Oops missed the advance tax payments?

In case for any reason the assessee missed the payment of Advance Tax on due dates. Then it shall be paid with Interest (most of the cases its 1%, refer the section) under Section 234B and Section 234C of the Income Tax Act.


1. Section 2(7) of the Income Tax Act

    "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes—
 (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or  assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person ;
 (b)  every person who is deemed to be an assessee under any provision of this Act ;
 (c)  every person who is deemed to be an assessee in default under any provision of this Act ;