CT 4 Advance payment of tax

 Advance payment of tax 

Liability for payment of advance tax

(1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219, in respect of an assessee’s current income i.e. the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year [Section 207]. 

(2) Under section 208, obligation to pay advance tax arises in every case where the advance tax payable is Rs.  10,000 or more.

Note - An assessee who is liable to pay advance tax of less than Rs.  10,000 will not be saddled with interest under sections 234B and 234C for defaults in payment of advance tax. However, the consequences under section 234A regarding interest for belated filing of return would be attracted.

(3) In case of senior citizens who have passive source of income like interest, rent, etc., the requirement of payment of advance tax causes genuine compliance  hardship. Therefore, in order to reduce the compliance burden on such senior citizens, exemption from payment of advance tax has been provided to a resident individual- 

(i) not having any income chargeable under the head “Profits and gains of business or profession”; and

(ii) of the age of 60 years or more. 

           Such senior citizens need not pay advance tax and are allowed to discharge their tax liability (other than TDS) by payment of self-assessment tax.

 Computation of advance tax

(1) An assessee has to estimate his current income and pay advance tax thereon. He need not submit any estimate or statement of income to the Assessing Officer, except where he has been served with notice by the Assessing Officer.

(2) Where an obligation to pay advance tax has arisen, the assessee shall himself compute the advance tax payable on his current income at the rates in force in the financial year and deposit the same, whether or not he has been earlier assessed to tax. 

(3) In the case of a person who has been already assessed by way of a regular  assessment in respect of the total income of any previous year, the Assessing Officer, if he is of the opinion that such person is liable to pay advance tax, may serve an order under section 210(3) requiring the assessee to pay advance tax. 

(4) For this purpose, 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 for any subsequent previous year, whichever is higher, shall be taken as the basis for computation of advance tax payable.

(5) The above order can be served by the Assessing Officer at any time during the financial year but not later than the last date of February.

(6) If, after sending the above notice, but before 1st March of the financial year, the assessee furnishes a return relating to any later previous year or an assessment is completed in respect of a later return of income, the Assessing Officer may amend the order for payment of advance tax on the basis of the computation of the income so returned or assessed.

(7) If the assessee feels that his own estimate of advance tax payable would be less than the one sent by the Assessing Officer, he can file estimate of his current income and advance tax payable thereon.

(8) Where the advance tax payable on assessee’s estimation is higher than the taxcomputed by the Assessing Officer, then, the advance tax shall be paid based upon such higher amount.

(9) In all cases, the tax calculated shall be reduced by the amount of tax deductible at source.

(10) The amount of advance tax payable by an assessee in the financial year calculated by - 

(i) the assessee himself based on his estimation of current income; or

(ii) the Assessing Officer as a result of an order under section 210(3) or amended order under section 210(4) is subject to the provisions of section 209(2), as per which the net agricultural income has to be considered for the purpose of computing advance tax.

 Instalments of advance tax and due dates

(1) Common advance tax payment schedule for both corporates and non-corporates [other than assessees computing profits on presumptive basis under section 44AD(1) or section 44ADA(1)]: 

Advance tax payment by assessees computing profits on presumptive 

basis under section 44AD(1) or section 44ADA(1):  An eligible assessee, opting for computation of profits or gains of business or profession on presumptive basis in respect of eligible business referred to in 

section 44AD(1) or in respect of eligible profession referred to in section 44ADA(1), shall be required to pay advance tax of the whole amount on or before 15th March of the F.Y. 

          However, any amount paid by way of advance tax on or before 31st March 

shall also be treated as advance tax paid during the F.Y. ending on that day.

Interest payable for deferment of advance tax [Section 234C]

(a) Manner of computation of interest under section 234C for deferment of advance tax by corporate and non-corporate assessees: 

In case an assessee, other than an assessee who declares profits and gains in accordance with the provisions of section 44AD(1) or section 44ADA(1), who is liable to pay advance tax under section 208 has failed to 

pay such tax or the advance tax paid by such assessee on its current incomeon or before the dates specified in column (1) is less than the specified percentage [given in column (2)] of tax due on returned income, then 

simple interest@1% per month for the period specified in column (4) on the amount of shortfall, as per column (3) is leviable under section 234C.

Note – However, if the advance tax paid by the assessee on the current income, on or before 15th June or 15th September, is not less than 12% or 36% of the tax due on the returned income, respectively, then, the assessee shall not be liable to pay any interest on the amount of the shortfall on those dates.