If the Income Tax Liability of any taxpayer is more than Rs. 10,000 in a financial year, then he is liable to pay such tax in installments during the year itself rather than paying this tax at the end of the year. This tax which is payable during the year is called “Advance Tax” or “pay as you earn tax” as tax is liable to be paid at the time the income is earned i.e. during the year rather than paying this tax at the end of the year.
Advance Tax receipts help the Govt. to receive a constant flow of tax receipts throughout the year so that expenses can be incurred rather than receiving all tax payments at the end of the year. Advance Tax is liable to be paid by all assesses like Salaried, Self Employed, Businessman etc. before the filing of Income Tax Return
For Individuals with Salary as the sole source of income, Advance Tax would be taken care of by the TDS deducted by the employer at the time of payment of salaries as reflected in Form 16and thus there would hardly be any Advance Tax payable. Senior Citizens not having any Business Income are also exempted from the payment of Advance Tax (Introduced by Budget 2012)
For all taxpayers earning income from any source other than salary, Advance Tax is payable in installments as explained below.
Payment of Advance Tax
Advance Tax is liable to be paid as per the following schedule
In case of Assessees other than Companies
| Due Date of Installment | Amount Payable |
| On or before15th Sep | Not less than 30% of the Advance Tax Liability |
| On or before15th Dec | Not less than 60% of the Advance Tax Liability as reduced by the amount,if any, paid in earlier installment |
| On or before15th Mar | 100% of the Advance Tax Liability as reduced by the amount, if any, paid in earlier installments |
In case of Companies
| Due Date of Installment | Amount Payable |
| On or before 15th June | Not less than 15% of the Advance Tax Liability |
| On or before 15th Sept | Not less than 45% of the Advance Tax Laibility as reduced by the amount, if any, paid in earlier installment |
| On or before 15th Dec | Not less than 75% of the Advance Tax Laibility as reduced by the amount, if any, paid in earlier installments |
| On or before 15th March | 100% of the Advance Tax Liability as reduced by the amount, if any, paid in earlier installments |
Payment of Advance Income Tax is to be made through Challan No. 280 by selecting Advance Tax (100) as the type of payment as shown below:-
Computation of Advance Tax
Advance Tax is liable to be paid by estimating the current year income and then applying the tax rates as per the Income Tax Slabs in force. The Advance Tax shall be computed as under:
| Income under the 5 Heads of Income | xxx | |
| (Less) | Brought Forward Losses and Allowances | xxx |
| (=) | Gross Total Income | xxx |
| (Less) | Chapter VI-A Deductions | xxx |
| (=) | Estimated Total Income | xxx |
| Income Tax on Estimated Total Income | xxx | |
| (Add) | Surcharge (if any) on the above Estimated Income | xxx |
| (=) | Total Tax Payable | xxx |
| (Less) | Relief under section 89 | xxx |
| (=) | Tax Liability | xxx |
| (Add) | 2% Education Cess | xxx |
| (Add) | 1% SHEC | xxx |
| (=) | Total Tax Liability | xxx |
| (Less) | Relief of tax u/s 90,90A,91 | xxx |
| (Less) | MAT Credit u/s 115JAA | xxx |
| (Less) | TDS as shown in Form 16/Form 16A and reflected in Form 26AS | xxx |
| (=) | Advance Tax Liability | xxx |
Payment of Advance Tax in case of Capital Gains
Although Advance Tax is liable to be paid on all incomes including Capital Gains, it is practically not possible to estimate the Capital Gains which may arise in an year. Therefore, in such cases, it is provided that if any such income arises after the due date of any installment, then, the entire amount of tax payable on such capital gain (after claiming exemption under section 54) shall be paid in remaining installments of Capital Gains which are due. If the entire amount of tax payable is so paid, then no interest on late payment will be levied.
Interest on Late Payment of Advance Tax
If the Income Tax is not payable as per the above schedule, Interest is liable to be paid for late payment of tax as follows
- Interest under section 234C – Interest @ 1% per month is payable if the tax is not paid as per the above schedule i.e. for Deferment in Installments of Advance Tax
- Interest under section 234B – Interest @ 1% is payable if 90% of the tax is not paid before the end of the financial year i.e. for Default in Payment of Advance Tax
For computing Interest u/s 234A/B/C and any other Interest, Income Tax shall be rounded off to nearest hundred and fraction of hundred shall be ignored
Interest under section 234C for Deferment of Payment of Tax
Interest under section 234C is liable to be paid @ 1% per month if
| (a) | Advance Tax paid on or before 15th Sept | < | 30% of the Tax Due on Returned Income |
| OR | |||
| (b) | Advance Tax paid on or before 15th Dec | < | 60% of the Tax Due on Returned Income |
| OR | |||
| (c) | Advance Tax paid on or before 15th Mar | < | Tax Due on Returned Income |
| OR | |||
| (d) | No Tax has been paid by the Assessee |
Note: Tax Due on Returned Income means the Tax on Total Income declared in
| Income Tax Return | xxx | |
| (Less) | Relief of Tax u/s 90 | xxx |
| (Less) | Relief of Tax u/s 90A | xxx |
| (Less) | Relief of Tax u/s 91 | xxx |
| (Less) | MAT Credit u/s 115JAA | xxx |
| (Less) | TDS Paid | xxx |
| (=) | Tax due on Returned Income | xxx |
COMPUTATION OF INTEREST FOR LATE PAYMENT OF ADVANCE TAX U/S 234C
The following computations have been shown for all assessees other than companies. Computation for Companies shall be done in the same manner as for assessees other than companies as shown below taking into the account the difference in the due dates.
Computation of Interest under Section 234C for Non-Company Assessees
| (a) | Rate | 1% per month simple interest |
| Period | 3 Months | |
| Amount | 30% of the “Tax due on Returned Income” | |
| (Less) Advance Tax paid on or before 15th Sep |
| (b) | Rate | 1% per month simple interest |
| Period | 3 Months | |
| Amount | 60% of the Amount Due on Returned Income | |
| (Less) Advance Tax Paid on or before 15th Dec |
| (c) | Rate | 1% per month simple interest |
| Period | 1 Month | |
| Amount | Tax Due on Returned Income | |
| (Less) Advance Tax paid on or before 15th March |
Interest under section 234B for Default in Payment of Tax
Interest @ 1% per month is payable if
| (a) | Advance Tax Paid by the Assessee during the Previous < | 90% of the Assessed Tax | |
| OR | |||
| (b) | No Advance Tax is paid by the Assessee |
Note: Assessed Tax means
| Tax determined u/s 143(1) or on Assessment u/s 143(3)/144/147/153A | xxx | |
| (Less) | Relief of Tax u/s 90 | xxx |
| (Less) | Relief of Tax u/s 90A | xxx |
| (Less) | Relief of Tax u/s 91 | xxx |
| (Less) | MAT Credit u/s 115JAA | xxx |
| (Less) | TDS/TCS | xxx |
| (=) | Assessed Tax | xxx |
In case Advance Tax paid by the Assessee is more than his actual Income Tax Liability, he can claim Refund of Income Tax by furnishing the details of tax deposited in the Income Tax Return