CA Inter Taxation Direct Tax Need and Computation of Advance Tax
Introduction: Advance Tax it is an important and very general term in taxation. Basic Introduction or meaning of advance tax is itself in the name. In certain circumstances, the assessee has to make a prepayment of taxes to meet regular tax liability arises on part of regular tax assessment.
Need of Advance Tax: An Assesses has to pay Tax in advance according to the provision laid down under section 208 to 219 of Income Tax Act, 1961.
Provision of section 208 of the Income-tax Act, 1961 contains that advance tax is a liability in case of assessee whose tax payable as per current income is Rs. 10000 or more. After making such payment an assessee can save him or herself from the attraction of section 234 B and 234 C for default in the payment of advance tax. However, interest u/s 234 A for late filing of return will be attracted.
In the case of a senior citizen, there is no need of paying tax in advance if the following two conditions are satisfied.
- Not having income chargeable under the head business profession.
- Of age 60 years or more.
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Computation of Advance Tax.
Now let’s understand, how liability of advance tax be computed, and when it is to be paid.
Computation of Advance Tax : Assessee needs to estimate his current year income on past data basis. Calculate tax on estimated income according to the applicable slab rate for the current year for which advance tax has to be paid. If the tax liability comes more than Rs. 10000.00 than it is to be paid in advance. We will further discuss in this article how it is to be paid. This working has to be done even in the case where the assessee has not been assessed earlier. If the assessee has assessed earlier way of regular assessment for the income of previous year assessing officer may serve notice him to pay advance tax under section 210(3) of the Income Tax Act, 1961. In case if the assessee has assessed for the income and any previous year or subsequent previous year at a higher income than according to that higher income advance tax will be calculated and paid according.
Further note that:
Assessing officer may serve the notice for the payment of advance tax maximum by February not later than this.
In a specific situation assessing officer may amend the order of payment of advance tax. Specific situation means the late filing of return of previous year or completion of assessment in respect of later return.
In case of any discrepancy, the assessee is allowed to file his own calculation of advance tax payable and pay advance tax as per same calculations.
If the estimated advance tax payable in accordance with the assessee is higher. Than that of assessing officer. It will be payable on a higher basis.
In all the cases of advance tax, the calculation amount of tax deducted at sources will be deducted from the gross amount calculated as tax payable in advance net of TDS amount will be paid as advance.
Due dates of payment of advance taxes
Combined chart of due dates for corporate and noncorporate assessees.
- On or before 15th June 15% of the total tax liability calculated for payment in advance to be paid by this date.
- On or before 15th September 45% of total tax liability calculated for payment of advance tax to be paid by this date as reduced by the amount paid in the previous
- On or before 15 December 75% of total tax liability calculated for payment of advance tax to be paid by this date as reduced by the amount paid in the previous two installments.
- On or before 15th March whole amount of tax to be paid as reduced by the amount paid in previous installments.
Thus an assessee who has a total tax liability of Rs. 10000.00 in a financial year can save interest penalty by depositing an amount equal to 90% of the total tax calculated as to be paid in advance.
In the end, if it is found that total advance tax paid is less than 90% of total tax liability than interest penalty under section 234 B and 234 C will be calculated.
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