Many taxpayers don’t know that they have to mandatorily pay taxes due in advance to the government in a financial year and end up paying a hefty penalty for not complying with Advance tax provisions as per Income Tax Act. Therefore, in today’s article, we are going to explain everything about Advance Tax.
So, without further ado let’s discuss. Happy reading!!
What is Advance Tax?
As governed by the Income Tax Act, 1961, Advance Tax refers to the tax that is payable by the assessee as calculated upon his estimation of income for the relevant year in advance instead of paying the same at the end of the year/ time of filing of return.
Who is liable to pay Advance Tax?
All assessees including businesses are required to pay Advance Tax if their tax liability is Rupees 10,000 or more in a particular financial year.
Please note An exception in this regard is made for the resident senior citizens, who do not have any income arising to them from the head of “Profits and Gains from Business and Profession” i.e, a resident individual assessee, who is aged 60 or above and who don’t have any business income in a particular financial year, is exempt to pay advance tax.
What are the due dates for Advance Tax payment?
The Income Tax Act has a predefined structure that states how the payment of Advance tax is to be made throughout the financial year.
Specified Date | Amount of Advance Tax |
On or before 15th June of the Previous Year | Up to 15% of the tax due on returned income |
On or before 15th September of the Previous Year | Up to 45% of the tax due on returned income |
On or before 15th December of the Previous Year | Up to 75% of the tax due on returned income |
On or before 15th March of the Previous Year | Up to 100% of the tax due on returned income |
If the assesses opts for the section 44AD/ADA (Presumptive Income from business/profession) then the due date of Advance Tax is 15th March of the Previous Year (i.e. only one installment needs to be paid for the entire year).
What will happen if the assessee fails to pay Advance Tax?
If the assessee has not paid or short paid the Advance Tax then the Assessing Officer may make an order under section 210 of the Income Tax Act and ask the assessee to pay the Advance Tax in the installment(s) due after the date of order.
The Assessing Officer can pass the order before the last day of February of the relevant Previous Year. The order made by the Assessing Officer shall have the cognizance of the following:
● The total assessed income of the latest Previous Year for which the Assessment has been made or
● The total income declared in the return of income of any subsequent Previous Year i.e. subsequent to the previous year for which the assessment has been made.
Whichever is higher.
Is credit for Advance Tax paid can be availed?
Any sum, other than interest or penalty, paid by or recovered from an assessee as Advance Tax, is treated as a payment of Advance Tax in respect of the income of the previous year and credit thereof shall be given by the Assessing Officer in the process of regular assessment.
Is Advance Tax leviable on the Non-Resident Indians?
Yes, Advance Tax is levied on the NRIs who have income in India more than Rs. 10000.
Is there any penalty for non-payment of Advance Tax?
Yes, non-payment of Advance Tax attracts the penalty under sections 234B and 234C of the Income Tax Act.
Is there any deduction available while computing income for the purposes of Advance Tax?
Yes, all the deductions mentioned in Chapter VII are eligible to be taken into account for computation purposes.
How to deposit Advance Tax?
Advance Tax can be deposited with the government online and offline as well.
● Online procedure to pay Advance Tax
To deposit online visit the e-portal then click on ‘Proceed Tab’ given under the CHALLAN NO./ITNS 280 section. Follow the said instructions and enter all the requisite details. Once you filed the challan you will be redirected to the payment gateway. After processing the payment, you will get a tax receipt mentioning the BSR code and challan serial number. The assessee needs to quote both at the time of filing the return.
● Offline procedure to pay Advance Tax
Assessee can pay Advance Tax offline via cheque/DD. The challan for offline payment can be downloaded by clicking here.
In case you are not able to process your Advance Tax payments and need some professional assistance. Please feel free to reach out to us. We are always happy to help you all.
