Advance tax is to be paid in different instalments. Unless the tax department changes the rules, at least 15% of the tax due for the current financial year will have to be paid by June 15.
As per section 208 of the Income Tax Act, every person whose estimated tax liability for the year is Rs 10,000
or more, shall pay his tax in advance, in the form of “advance tax”. However, a resident senior citizen (i.e., an individual of the age of 60 years or above (during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.
Advance tax is to be paid in different instalments. Unless the tax department changes the rules, at least 15% of the tax due for the current financial year will have to be paid by June 15. Any tax paid till 31st March will be treated as advance tax. If the last day for payment of any instalment of advance tax is a day on which the banks are closed, then the taxpayer should pay the advance tax on the immediately following working day.
Due dates for payment of advance tax instalments:
Advance tax is to be paid in different instalments. The due date of payment of different instalments of advance tax are as follows:
|By 15th June
|By 15th September
|By 15th December
|By 15th March
|All Assesses ( other than the eligible assesses as referred to in section 44AD or 44ADA)
|Minimum 15% of the total advance tax
|Minimum 45% of the total advance tax
|Minimum 75% of the total advance tax
|Taxpayers who have opted for presumptive taxation scheme of section 44AD or 44ADA
Advance tax calculator:
In case you have trouble finding out your advance tax liability. You can use the advance tax calculator available on the income tax department website (https://www.incometaxindia.gov.in/). In order to calculate your advance tax, you have to input net taxable income, surcharge, education cess, secondary and higher education cess, total tax liability, relief, TDS/TCS/MAT, Assessed Tax, and some other info.
The disclaimer on the website states, “This calculator is only to enable the public to have quick and easy access to basic tax calculation and does not purport to give correct tax calculation in all circumstances. It is advised that for filing of returns the exact calculation may be made as per the provisions contained in the relevant Acts, Rules, etc.”
Mode of payment of advance tax:
- As per Rule 125 of the Income-tax Rules, 1962 a corporate taxpayer (i.e., a company) shall pay taxes through the electronic payment mode using the internet banking facility of the authorized banks.
- Taxpayers other than a company, who are required to get their accounts audited, shall pay taxes through the electronic payment mode using the internet banking facility of the authorized banks.
- Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. by depositing the challan at the receiving bank.
Advance tax payment:
- Advance tax can be paid by the taxpayer either on his own account or in pursuance of an order of the Assessing Officer. The taxpayer who is liable to pay advance tax is required to estimate his current income and pay advance tax on his own account. In such a case, he is not required to submit an estimate or statement of income to the tax authorities.
- After making payment of first or second or third instalment of advance tax (as the case may be), if there is a change in the tax liability, then the taxpayer can revise the quantum of advance tax in the remaining instalment(s) and pay the tax as per revised estimates. Tax can be computed on the current income (estimated by the taxpayer) 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.
Advance tax late payment interest and penalty:
- In case the tax payment which is due on June 15 is deferred, interest at 1 percent per month is levied for three months- September 15 and December 15, and for one month in the case of deferral of payment of the last instalment, i.e., a tax that is due on March 15.
- Remember that interest is not payable if the advance tax paid on or before June 15 is 12 percent or more of the tax due for the year. Interest is also not levied if the advance tax paid on or before September 15 is 36 percent or more of the tax due for the year.
- Also, advance tax on capital gains becomes payable starting from the quarter in which the capital asset is sold meaning no interest is charged in respect of advance tax on capital gains if the tax on such income is paid in subsequent instalments due when the gain arises before March 15; if such a gain arises after March 15, no interest will be charged if the tax is paid on or before March 31.
- If the total advance tax paid amounts to less than 90 percent of the taxpayer’s advance tax liability, interest is payable at the rate of 1 percent per month from April 1, following the year in which the tax is due, until balance payment of the tax.
Additional Advance tax information here.
The economy is facing unprecedented disruption and uncertainty due to the COVID-19 pandemic.
It is worth mentioning that the CBDT vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, dated March 31, 2020, has extended all respective due dates, falling during the period from March 20, 2020, to June 29, 2020, till June 30, 2020. The benefit of the extended due date shall not be available in respect of payment of tax.
However, any delay in payment of tax which is due for payment from 20-03-2020 to 29- 06-2020 shall attract interest at the lower rate of 0.75% for every month or part thereof if the same is paid after the due date but on or before 30-06-2020.
To summarise, if the first instalment of appropriate advance tax is paid by
- June 15, 2020, there will be no interest levied
- June 30, 2020, reduced interest will be levied at 0.75 percent per month, instead of 1 percent a month
- After June 30, 2020, interest will be levied at 1 percent a month.