Who is Liable to Pay Advance Tax
By Section 208 of the Income-tax Act, 1961, any person whose tax liability after reducing TDS deducted is more than Rs 10,000 per year is required to pay advance tax.
Complete or Partial Exemptions from Advance Tax Payment
Only Resident Senior Citizens who do not have any income under the head Business and Profession are completely exempted from paying advance tax during the year.
Assesee options for presumptive income u/s 44AD are partially exempted from paying advance tax. They have to pay 100% of advance tax before 15th March of each year and they are not required to pay advance tax in each quarters unlike other tax payers.
Due Dates for Payment of Advance Income Tax
Tax Payer | 15th June | 15th September | 15th December | 15th March |
All Assessee (Except option presumtive taxation u/s 44AD | 15% of Advance Tax on Estimated Income of the Year | 45% of Advance Tax on Estimated Income of the Year | 75% of Advance Tax on Estimated Income of the Year | 100% of Advance Tax on Estimated Income of the Year |
Opting presumtive taxation u/s 44AD | NIL | NIL | NIL | 100% of Advance Tax on Estimated Income of the Year |
Power of Assessing Officer (Tax Officer) to Direct Payment of Advance Tax
The assessing officer is empowered to pass an order to direct the taxpayer to pay the advance tax if the taxpayer has not paid or short-paid its advance. Such order can be passed by assessing officer during the year any day before end of February month of the year.
On receipt of order of Assessing officer, if tax payer is of the opinion that his income is lower than the estimate of income by assessing officer than tax payaer can sumit its own estimate of income in Form 28A to the assessing officer.
In case estimate of income is higher , than in that case suo moto taxpayer can pay the additional advance tax over and above estimate of income in the order of officer.
Even after order of assessing officer , tax payer do not pay the due advance tax than tax payer will be considered as assesee in default and dues will be recovered as per recovery of taxes and dues procedure specified in the law like anyother income tax dues.
How to Compute Advance Tax in Case of Capital Gain & Dividend & Lottery,etc.
Advance tax is payable on total income which includes capital gains, dividend and casual income (i.e., income from lotteries, crossword puzzles, etc.).
However, it is practically not possible to estimate the income from capital gain and casual income in advance. Therefore, in such cases it is provided that if any such income arises after the due date of any instalment, then the tax calculated on capital gain and casual income shall be paid in remaining instalments of advance tax which are due.
If the entire amount of advance tax is paid on or before specifed due date then no interest for
late payment of advance tax is levied.
Advance Tax Due Date Falling on Bank Holiday
Any taxes paid till 31st March is considered as advance tax. If the last day for the payment of advance tax is the day on which the banks are closed, then one should pay the advance tax on the immediately following working day and no interest shall be charged on such payments of advance tax.
Illustration to Understand Advance Tax Payment
ABC LLP total income is as follows .
Income from Business and Profession (Consultancy service) - Rs 10 lakhs in September,2023 and Rs 3 Lakhs in January 24.
Income from Dividend - Rs. 4 Lakhs in Oct'23 and Rs 1 Lakhs on 16th April'23
Income from Short Term Capital Gain from Equity Shares- Rs 12 Lakhs in 12th March'24.
TDS Deducted during the year - Rs. 20,000 in September'23
Advance tax Liability of ABC LLP will be as follows :
Tax Rate on Business and Profession , Divdned Income will be 31.2% (presuming 30% income tax rate plus 4% cess) and on Short Term Capital Gain will be 15% plus 4% cess
Income | Income Tax | 15th June | 15th Sept | 15th Dec | 15th March |
Business & Profession (10 + 3) = Rs 13 Lakhs | 4,05,600 | 60,840 | 1,82,520 | 3,04,200 | 4,05,600 |
Dividend Income (April23) | 31,200 | 4,680 | 14,040 | 23,400 | 31,200 |
Dividend Income (Oct23) | 1,24,800 | 93,600 | 1,24,800 | ||
Capital Gain (March24) | 1,87,200 | 1,87,200 | |||
Total Liability | 65,520 | 1,96,560 | 4,21,200 | 7,48,800 | |
Advance Tax Sett Off of Past Advance Tax Paid & TDS Deducted | 20,000 | 70,000 | 2,25,000 | 4,25,000 | |
Liability for the Quarter | 45,520 | 1,26,560 | 1,96,200 | 3,23,800 | |
Advance Tax Paid | 50,000 | 1,55,000 | 2,00,000 | 3,25,000 |
Notes :
Date of Accruing of business and profession does not matter and evenly tax is due to be paid in each quarter on basis of year income
In case of capital gain and dividend , advance tax is to be paid only from the quarter in which the income accrues or is received whichever is earlier.
In case any TDS was deducted in first quarter itself irrespective of month of deduction of TDS.