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Provisions of Advance Tax

ADVANCE TAX

In order to increase tax base, advance tax was introduced in Section 208 of 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”.

However following  persons are exempt from this provision :-

  • A tax payer whose income Tax liability is less than Rs. 10,000
  • A taxpayer opting for the presumptive taxation scheme of section 44AD will not be liable to pay advance tax in respect of business for which the presumptive taxation scheme of section 44AD is adopted.
  • A resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.

Now before going through with the relevant calculations it must be noted that The Tax payer who is liable to pay advance tax is required to estimate his current income and pay advance tax on his own account but he is not required to submit any estimate or statement of income to the tax authorities. From the tax so computed, tax deducted or collected at source, relief of tax allowed under section 90 or section 90A or any deduction under section 91 or any tax credit allowed to be set off as per section 115JAA or section 115JD will be deducted and the balance tax payable will be used to compute the advance tax liability.

Due Dates for payment of Advance Tax installments :-

Status of AssesseBy 15th JuneBy 15th Sept.By 15th Dec.By 15th March
Non CorporateNilUp to 30% of  TaxUp to 60% of  TaxUp to 100% of  Tax
CorporateUp to 15% of  TaxUp to 45% of  TaxUp to 75% of  TaxUp to 100% of  Tax

Example

Mr. K is an engineer. His estimated Income for the financial year 2015-16 amounted to Rs. 5,00,000. Amount of TDS already deducted is Rs. 4,000 . By which dates he should pay advance tax and how much?

Soln.

 STEP 1 Calculation of Tax Liability

Income Tax =                    Rs. 25,000

Less: Rebate =                   Rs. 2,000

Net Tax =                            Rs. 23,000

Add: Cess=                          Rs. 690

Less: TDS =                        Rs. 4,000

Tax Payable=                    Rs. 19,690

Now as Mr. K is a non-corporate assesse therefore relevant due dates and amount payable is as follows:-

DUE DATEAmount (in Rs.)
By 15th Sept5,907
By 15th Dec.11,814
By 15th March19,690

PAYMENT MODE

As per Rule 125 of the Income-tax Rules, 1962 a corporate taxpayer (i.e., a company) and Taxpayers 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 the authorised banks. Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. by depositing the challan at the receiving bank.

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