Advance Tax Payment: Due Dates and Interest on Late Payment

If the Income Tax Liability of any assessee is more than Rs. 10,000 in a financial year, then he is liable to pay such tax in instalments 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. For all assesses earning income from any source other than salary, Advance Tax is payable in instalments as explained below.

Payment of Advance Tax

Advance Tax is liable to be paid as per the following schedule

In case of Assessees other than Companies

Due Date of Installment Amount Payable
On or before 15th Sep Not less than 30% of the Advance Tax Liability
On or before 15th Dec Not less than 60% of the Advance Tax Liability as reduced by the amount,if any, paid in earlier installment
On or before 15th Mar 100% of the Advance Tax Liability as reduced by the amount, if any, paid in earlier installments


In case of Companies

Due Date of Installment Amount Payable
On or before 15th June Not less than 15% of the Advance Tax Liability
On or before 15th Sept Not less than 45% of the Advance Tax Laibility as reduced by the amount, if any, paid in earlier installment
On or before 15th Dec Not less than 75% of the Advance Tax Laibility as reduced by the amount, if any, paid in earlier installments
On or before 15th March 100% of the Advance Tax Liability as reduced by the amount, if any, paid in earlier installments

Payment of Advance Income Tax is to be made through Challan No. 280 by selecting Advance Tax (100) as the type of payment as shown below:-

advance tax 550x251 Advance Tax Payment: Due Dates and Interest on Late Payment

Computation of Advance Tax

Advance Tax is liable to be paid by estimating the current year income and then applying the tax rates as per the Income Tax Slabs in force. The Advance Tax shall be computed as under:

Income under the 5 Heads of Income xxx
(Less) Brought Forward Losses and Allowances xxx
(=) Gross Total Income xxx
(Less) Chapter VI-A Deductions xxx
(=) Estimated Total Income xxx

 

 

 

Income Tax on Estimated Total Income xxx
(Add) Surcharge (if any) on the above Estimated Income xxx
(=) Total Tax Payable xxx
(Less) Relief under section 89 xxx
(=) Tax Liability xxx
(Add) 2% Education Cess xxx
(Add) 1% SHEC xxx
(=) Total Tax Liability xxx
(Less) Relief of tax u/s 90,90A,91 xxx
(Less) MAT Credit u/s 115JAA xxx
(Less) TDS as shown in Form 16/Form 16A and reflected in Form 26AS xxx
(=) Advance Tax Liability xxx

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 leviable.

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

Interest under section 234C for Deferment of Payment of Tax

Interest under section 234C is liable to be paid @ 1% per month if

(a) Advance Tax paid on or before 15th Sept     <     30% of the Tax Due on Returned Income
OR
(b) Advance Tax paid on or before 15th Dec     <     60% of the Tax Due on Returned Income
OR
(c) Advance Tax paid on or before 15th Mar     <     Tax Due on Returned Income
OR
(d) No Tax has been paid by the Assessee


Note: Tax Due on Returned Income means the Tax on Total Income declared in

Income Tax Return xxx
(Less) Relief of Tax u/s 90 xxx
(Less) Relief of Tax u/s 90A xxx
(Less) Relief of Tax u/s 91 xxx
(Less) MAT Credit u/s 115JAA xxx
(Less) TDS Paid xxx
  (=) Tax due on Returned Income xxx

Computation of Interest for Late Payment of Advance Tax u/s 234C

The following computations have been shown for all assessees other than companies. Computation for Companies shall be done in the same manner as for assessees other than companies as shown below taking into the account the difference in the due dates.

Computation of Interest under Section 234C for Non-Company Assessees

(a) Rate 1% per month simple interest
Period 3 Months
Amount 30% of the “Tax due on Returned Income”
(Less)   Advance Tax paid on or before 15th Sep

 

(b) Rate 1% per month simple interest
Period 3 Months
Amount 60% of the Amount Due on Returned Income
(Less) Advance Tax Paid on or before 15th Dec

 

(c) Rate 1% per month simple interest
Period 1 Month
Amount Tax Due on Returned Income
(Less) Advance Tax paid on or before 15th March

Interest under section 234B for Default in Payment of Tax

Interest @ 1% per month is payable if

(a) Advance Tax Paid by the Assessee during the Previous Year <     90% of the Assessed Tax
OR
(b) No Advance Tax is paid by the Assessee

 

Note: Assessed Tax means

Tax determined u/s 143(1) or on Assessment u/s 143(3)/144/147/153A xxx
(Less) Relief of Tax u/s 90 xxx
(Less) Relief of Tax u/s 90A xxx
(Less) Relief of Tax u/s 91 xxx
(Less) MAT Credit u/s 115JAA xxx
(Less) TDS/TCS xxx
(=) Assessed Tax xxx

 

In case Advance Tax paid by the Assessee is more than his actual Income Tax Liability, he can claim Refund of Income Tax by furnishing the details of tax deposited in the Income Tax Return

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