What is an Advance Tax?
As per the Section 208, the Advance tax is liable for payment of all items of income of the year earned from different sources including capital gain, winning from the lottery, salary, business, profession, rent, etc. In a financial year if your total tax liability exceeds Rs. 10,000/- you will have to pay Advance Tax. It is also known as ‘Pay as you earn’ scheme. Advance tax should be paid in the same year in which the income was received. Advance payment of tax is applicable for the assessment year 1989-1990. Advance tax is supposed to be paid before the end of the financial year.
Who has to pay an Advance Tax?
A professional person need not pay any advance tax as they already pay tax at source. Advance tax applies to individuals who earn income from sources other than salary. If a person receives income from other sources other than salary, then they have to pay advance tax too.
Person liable to advance tax
- According to section 208, makes it obligatory to pay Advance Tax in every case where advance tax payable is Rs. 10,000/- or more.
- Income from capital gains on shares.
- Interest from fixed deposits
- Income earned from Winnings lottery/ crossword puzzles etc.
- Rent/income received from house property.
Person not liable to advance tax
- An Assessee, who has opted for the scheme of computing business income under 44 AD on prospective base. At the rate of 8% of turnover shall be exempted from payment of Advance Tax related. (effect from the assessment year( 2011-12).
- A senior citizen, who is a resident individual who is at least 60 years of age not having any income from Bussiness, Profession is not liable to pay advance tax. (From the financial year 2012-13 or assessment year 2013-140 onwards).
Mr Minguk is running a provision store. The turnover of the Provision store for the financial year 2014-15 amounted to Rs. 84,00,000/-. Mr.Minguk wants to declare income under section 44AD at 8% of the turnover. He does not have any other sources of income. Will Mr Minguk be liable to pay advance tax?
Mr Minguk satisfies the section 44AD in respect of provision store business. Hence, Minguk can adopt the provisions of section 44AD and declare income at 8% of the turnover. So Mr Minguk will not be liable to pay any advance tax in respect of income generated from his business.
Due dates of payments of advanced tax
After March 31, 2008, all corporate taxpayers and other assesses will have to make an electronic payment of tax through internet by credit/debit card.
Advance tax is payable as follows,
|Coporate Assessee||Non- Corporate Assessee|
|On or before June 15 of the Previous Year||Up to 15% of advance tax is payable||Nil|
|On or before September 15 of the Previous Year||Up to 45% of advance tax is payable||Up to 30% of advance tax is payable|
|On or before December 15 of the Previous Year||Up to 100% of advance tax is payable||Up to 100% of advance tax is payable|
- Note 1
Any tax paid up to 31st March will be known as the advance tax.
- Note 2
According to the [Circular No. 676, dated 14-1-1994], If the last day for payment of any instalment of advance tax is a day on which the banks are closed, then the assessee should pay the advance tax on the immediately following working day.
Advance Tax Payment mode
As per Rule 125 of the Income Tax Rules, 1962, a corporate assessee shall pay tax through the electronic payment mode.( By using the internet banking facility of the authorised banks).
A Non- Corporate assessee, who are required to get their accounts audited, should pay tax through the electronic payment mode.
Any other assessee can pay tax either by electronic mode or by depositing the challan at the receiving bank.
Payment of advance tax
- The taxpayer can pay advance tax either on his account or in pursuance of an order of the Assessing Officer.
- The assessee who is liable to pay advance tax is required to estimate his current income and pay advance tax on his account. In such a case, he is not required to submit any estimate or statement of revenue to the tax authorities.
- After making payment of first or the second instalment of advance tax, if there is a change in the tax liability, then the taxpayer can revise the quantum of advance tax in the remaining instalments and pay the tax as per revised estimates.
- Tax can be computed on the current income at the rates in force during the financial year.
- From the tax so computed, tax deducted or collected at source will be deducted and the balance tax payable will be used to compute the advance tax liability.
- Also, 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 shall also be deducted while computing the advance tax liability.
How to pay Advance Tax
The Department of Income Tax India offers a provision to pay Advance Tax online.
The advance tax can be paid online through the online facility provided by the Income Tax department. Listed below are the steps that need to be followed to make a successful online payment for advance tax.
- Go to the Income Tax India official website www.incometaxindia.gov.in.
- Select the right challan to pay your Advance tax.
- Fill in the relevant details in the form such as the proper assessment year, address, phone number, email address, bank name, captcha code and other such important details.
- Once you are complete filling in the details, you’ll be redirected to the bank’s Net Banking page.
- Next, the taxpayer will get details of your payment including your challan number.
- It is essential to report your payment after you’ve made the payment.
Payment of advance tax in pursuance of order of Assessing Officer
If assessee fails to pay advance tax and already been assessed by way of regular assessment in respect of the total income of any previous year, then the Assessing Officer may pass an order under section 210(3) requiring him to pay advance tax on his current year’s income. Such an order may be passed during the financial year, but not later than the last day of February
Computation of Tax by assessing officer
The total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment or the total income returned by the assessee in any return of income furnished by him for any subsequent previous year, whichever is higher, shall be taken as current income by the Assessing Officer.