Advance tax is an Income tax. As the name suggests advance tax is paid much before the period of filing of income tax return. Income tax act has prescribed section 208 that makes it obligatory for the taxpayer to pay tax in advance. There have been few conditions and due dates prescribed that taxpayer must follow, else interest is payable on non-payment and short payment of advance tax. Tax deduction at source (TDS) in itself amount virtually to advance payment of tax.
- When Liability to Advance tax arises?
Every person is liable to pay advance tax where his/her estimated income tax liability is Rs 10,000 or more. Every person means Individual, HUF, Private Limited Company, Limited company, Co-operative society, AOP, BOI are covered under section 208 of the income tax act.
Senior citizen (i.e. resident induvial of the age of 60 years or more at any time during the financial year) is exempt for payment of advance tax not having income from Business/Profession.
2. On which incomes advance tax is paid?
Advance tax is paid on all income arise from all sources. Source of income are divided and taxable under the following heads of income:
- Income from Salary
- Income from House Property
- Income from Business and Profession
- Income from Capital Gain
- Income from Other Source
3. What are the due dates for payment of Advance tax?
| Due date for payment of advance tax | All Taxpayers (other than person declaring income u/s 44AD and 44ADA) |
| On or before June 15 | Up to 15% of advance tax payable |
| On or before September 15 | Up to 45% of advance tax payable |
| On or before December 15 | Up to 75% of advance tax payable |
| On or before March 15 | Up to 100% of advance tax payable |
A taxpayer who has opted for scheme for computation of income under section 44AD and 44ADA (presumptive scheme) was exempted from payment of advance tax up to assessment year 2016-17. From assessment year 2017-18 person covered under section 44AD and 44ADA is liable to pay 100% advance tax on or before 15th March of the relevant previous year.
Note: Any payment of advance tax made on or before 31st March is treated as advance tax.
4. What are the modes of payment of advance tax:
Rule 125 of the income tax rule 1962 prescribed mode of payment for the following persons:
- For corporate taxpayer or taxpayer other than a company, who are required to get their accounts audited (i.e. company) – through internet banking facility.
- For other taxpayer- through internet banking facility or by physical mode i.e. by depositing the challan at the receiving bank.
5. Consequences if Advance tax not deposited:
Failure to pay advance tax or to pay 90% of tax will make the assessee liable to simple interest at 1% every month or part of a month under section 234B and 234C. Non-compliance would attract the penal provision covered under section 273 and section 273B.
6. Advance tax by Non-resident:
These is no separate provision under the income tax law for Non-resident (NRI) to deposit advance tax. Advance tax’s provisions apply to resident will equally apply to non-resident. 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.
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