What is Advance Tax?

Every person is required to pay income tax on their income during the current financial year which they expect. It means that every tax payer should calculate his expected income and income tax payable during the current financial year and deposit the same during the current financial year itself. This is called Advance Tax. For example Mr. X expects that he needs to pay Rs.20000/= tax on his expected income during the financial year 2018-19. In this case Mr. X is supposed to deposit Rs. 20000/= during financial year 2018-19 itself. This is called advance tax.

Who is Liable to Pay Advance Tax?

Any person whose expected income tax liability is Rs.10000/= or more during the current financial year, mus deposit advance tax during the current year itself. However, the amount of TDS or TCS can be adjusted from the  total tax liability.

For example, the tax liability of Mr. X  is Rs.18000/= during the financial year 2018-19 and amount of TDS is Rs.6000/=. In this case, he has to pay advance tax Rs.12000/=

Note: Senior citizens who are not having any income from business or profession, are not required to pay advance income tax. However, if they want to deposit advance tax, the are free to deposit.

Due dates of Payment of Advance Tax

Advance tax is not payable in one time during the financial year but is paid in installments in certain percentage. Currently, following are the dates and amount of payment of advance tax for all assessees::-

Due Date for Payment of                            Advance Tax

Advance Tax                                                installement

By 15th June                                                   15% of advance tax

By 15th September                                         30% of advance tax

By 15th March                                                  25% of advance tax

 

By 15th December                                          30% of advance tax

By 31st March                                  Tax on capital gains or casual                                                          incomes arising after 15th March, if any

Interest for deferment of Advance Tax under Section 234C

All assessees who are supposed to pay advance tax, do not deposit the correct amount in time as mentioned above, they have to pay simple interest @ 1% on deferment of advance tax as under:-

(a) If the tax is paid less than 15% of     Simple interest @ 1% per month

     tax due up to 15th June                     of shortfall

(b) If the tax is paid less than 45% of     Simple interest @ 1% per month

     tax due up to 15th September           of shortfall

(c) If the tax is paid less than 75% of     Simple interest @ 1% per month

     tax due up to 15th September           of shortfall

(d) If the tax is paid less 100%               Simple interest @ 1% per month

     tax due up to 15th March                 of shortfall

Note: For the purpose of calculating interest, the amount of shortfall should be rounded off to the nearest Rs.100/= ignoring any friction of Rs.100.

Note: The business/professional assessees, declaring their income under estimated scheme under section 44AD or 44ADA are supposed to pay the simple interest @1% on amount of shortfall of the tax paid if it is less than 100% up to 15th March

 Illustration: Mr. X has the tax liability of Rs.131907/=after adjusting the amount of TDS for financial year 2018-19. He did not pay any advance tax. Calculate the amount of interest under section 234C?

Solution: Mr. X has to pay the interest under section 234C as under:-

Particulars            Up to 15th    Up to 15th  Up to 15th   Up to 15th

                               June’18         Sept’18           Dec’18        Mar’19

%age of deposit         15%             45%              75%               100%

Amount to deposit  19786              59358          98930             131907

Amount deposited     0                     0                     0                       0

Shortfall                   19786             59358           98930            131907

R/off in Rs.100        19700             59300           98900            131900

Interest rate                1%                 1%                 1%                 1%

Period of interest     3 months    3 months     3 months         1 month

Amount of Interest     591              1779            2967                  1319

Total Interest under section 234C Rs.6656/=

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