Advance Payment of Tax [Section 207 to 219]
1. Advance tax is payable in respect of all income including capital gains and casual income.
2. Under section 208, obligation to pay advance tax arises in every case where the advance tax payable is Rs. 10,000 or more.
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 now been provided to a resident individual-
(1) not having any income chargeable under the head “Profits and gains of business or profession”; and
(2) 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.
Limit for payment of advance tax : 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 return shall continue.
No need for filing estimate: 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.
Where obligation to 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.
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, can serve an order under section 210(3) requiring the assessee to pay advance tax. For this purpose, the total income of the latest previous year in respect of which the assessee has been assessed or the total income returned by the assessee for any subsequent previous year, whichever is higher, shall be taken as the basis for computation of advance tax payable.
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.
If, after sending the above order, 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 can amend computation on the income to returned or assessed.
If 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. Where the advance tax payable or assessee’s estimation would be higher than the tax computed by the Assessing Officer, then the advance tax shall be paid based upon such higher amount.
No reduction of ‘tax deductible but not deducted’ and ‘tax collectible but not collected’, while computing advance tax liability
(i) As per the provisions of section 209, the amount of advance tax payable by a person is computed by reducing the amount of income-tax which would be deductible or collectible at source during the financial year from any income which has been taken into account in computing the total income.
(ii) Some courts have opined that in case where the payer pays any amount (on which tax is deductible at source) without deduction of tax at source, the payee shall not be liable to pay advance tax to the extent tax is deductible from such amount.
(iii) With a view to make such a person (payee) liable to pay advance tax, a proviso has been inserted in section 209(1)(d). Accordingly, the amount of tax deductible at source but not so deducted by the payer shall not be reduced from the income tax liability of the payee for determining his liability to pay advance tax.
(iv) In effect, only if tax has actually been deducted at source, the same can be reduced for computing advance tax liability of the payee. Tax deductible but not so deducted cannot be reduced for computing advance tax liability of the payee.
(v) Similarly, only if tax has actually been collected at source, the same can be reduced for computing advance tax liability of the buyer or licensee or lessee. Tax collectible but not so collected cannot be reduced for computing advance tax liability of the buyer or licensee or lessee.
If the last date for payment of any installment of advance tax is a day on which the receiving bank is closed, the assessee can make the payment on the next immediately following working day and in such cases, the mandatory interest leviable under section 234B and 234C would not be charged.
Where advance tax is payable by virtue of the notice of demand issued by the Assessing Officer, the whole or the appropriate part of the advance tax shall be payable in the remaining installments.
Where the assessee does not pay any installment by the due date, he shall be deemed to be an assessee-in-default in respect of such installment.
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