All about Advance Tax for Taxpayers

What is Advance Tax?

As it can be easily understood, it is payment of the taxes in advance instead of lump sum payment at the end of the year. A taxpayer is liable to pay taxes in advance i.e. before the end of the year. Any taxpayer whose tax liability for the year is Rs. 10,000/- and more shall be liable to pay advance tax. It is popularly known as ‘pay as you earn’ scheme.

Why is Advance Tax Imposed?

Instead of receiving tax revenue at the end of the financial year, receipt of the tax revenue in advance and in parts all through the year, helps the government to plan its financial activities and manage its expenses effectively.

Who is liable to pay Advance Tax?

Any tax payer who has any income other than in form of salary and whose tax liability for the year is Rs. 10,000/- and more shall be liable to pay advance tax. A tax payer who has income in the form of salary is subject to TDS which is deducted by the employer and paid to the government, and thus a salaried assessee is not liable to separately pay advance tax.

How to pay Advance Tax?

The advance tax payments are to be made in installments as per the due dates specified by the income tax department. Generally the total tax liability is to be paid in advance in four installments as per the specified due dates.

Payment Schedule of Advance Tax for Individual & Corporate Tax Payers:

What is the consequence for non-payment of advance tax?

If any person is responsible to pay advance tax and if such person fails to do so, penalty and interest is imposed on such person, which has to be paid along with the taxes before filing the income tax return. If the tax payer fails to pay advance tax or pays the amount which is less than the mandated percentage, then the tax payer shall have to pay an interest at 1% per month at simple interest on such defaulted tax amount. If at the end of the financial year, the total tax liability is not paid, interest at 1% per month shall be imposed until the total tax is actually paid.

What if a tax payer pays advance tax which is more than the total tax liability?

If any taxpayer pays advance tax which is more than the total tax liability, such tax payer can claim refund of the excess amount paid as advance tax. The tax payer shall also be entitled to receive interest at 6% per annum if such excess amount is 10% or more of the total tax liability.

Who is exempted from payment of advance tax payment?

1. Any taxpayer who has income from salary shall be exempted from payment of advance tax as mentioned above.
2. Any person who is of age atleast 60 years or more, i.e. senior citizen who does not have any income in the form of business or profession shall be exempted from payment of advance tax.
3. Any assessee who opts for presumptive tax scheme under section 44AD / 44ADA are exempted from payment of advance tax and they have an option to pay their entire tax amount on or before 15^thMarch in one installment.

Key Points to Remember

1. Any payment of tax made on or before 31^stMarch, shall also be treated as advance tax payment during the year. Thus, in case an assessee happens to miss the last deadline of 15^thMarch, such assessee can still go ahead and make payment before March 31^st.
2. Advance Tax is to be paid through Challan 280.
3. Any senior citizen who has income from business or profession shall be liable to pay advance tax as specified unless such senior citizen has not opted for presumptive tax scheme.
4. If the last day of payment of installment, happens to be a Sunday or a bank holiday or when banks are closed, the assessee can make the payment of advance tax on the immediate next working day. In such cases, provision of interest shall not be levied.

Jitesh Telisara & Associates LLP, CA In Kalyani Nagar is a professionally managed firm catering to domestic and international clients with a broad range of services in domestic and international taxation, regulatory and advisory services and crosses border transaction-related services.

The team at the firm has dedicated and experienced professionals and associates like Chartered Accountants, Company Secretary and Consultants to provide end to end services to your business. With the effort of gaining a deep understanding of your business, the team is committed to providing valuable, consistent and efficient services based on its in-depth knowledge and wide experience in the areas of audit, taxation, regulatory compliances, and related business services.

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