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Advance Tax Payment INDIA

Advance Tax Payment INDIA

If the Income Tax Liability of any taxpayer is more than Rs. 10,000 in a financial year, then he is liable to pay such tax in installments during the year itself rather than paying this tax at the end of the year. This tax which is payable during the year is called “Advance Tax” or “pay as you earn tax” as tax is liable to be paid at the time the income is earned i.e. during the year rather than paying this tax at the end of the year.

Advance Tax receipts help the Govt. to receive a constant flow of tax receipts throughout the year so that expenses can be incurred rather than receiving all tax payments at the end of the year. Advance Tax is liable to be paid by all assesses like Salaried, Self Employed, Businessman etc. before the filing of Income Tax Return

For Individuals with Salary as the sole source of income, Advance Tax would be taken care of by the TDS deducted by the employer at the time of payment of salaries as reflected in Form 16 and thus there would hardly be any Advance Tax payable. Senior Citizens not having any Business Income are also exempted from the payment of Advance Tax (Introduced by Budget 2012)

Payment of Advance Tax in case of Capital Gains

Although Advance Tax is liable to be paid on all incomes including Capital Gains, it is practically not possible to estimate the Capital Gains which may arise in an year. Therefore, in such cases, it is provided that if any such income arises after the due date of any installment, then, the entire amount of tax payable on such capital gain (after claiming exemption under section 54) shall be paid in remaining installments of Capital Gains which are due. If the entire amount of tax payable is so paid, then no interest on late payment will be levied.

Interest on Late Payment of Advance Tax

If the Income Tax is not payable as per the above schedule, Interest is liable to be paid for late payment of tax as follows

  1. Interest under section 234C – Interest @ 1% per month is payable if the tax is not paid as per the above schedule i.e. for Deferment in Installments of Advance Tax
  2. Interest under section 234B – Interest @ 1% is payable if 90% of the tax is not paid before the end of the financial year i.e. for Default in Payment of Advance Tax

For computing Interest u/s 234A/B/C and any other Interest, Income Tax shall be rounded off to nearest hundred and fraction of hundred shall be ignored

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