What is Advance Tax? As per Indian Income Tax Act all the tax payers are required to pay
income tax on their expected income of current financial year during the same finance year. For
example Mr. X expects his income Rupees Five Lac during finance year 2016-17 and income tax
liability is estimated Rs.15000/= after taking all tax savings figures in to consideration. If Mr. X
pays this Income Tax in advance i.e. before 31.03.2017, it will be called as payment of advance
income tax. However, this amount of advance income tax shall be adjusted against actual income
tax payable on actual income of Mr. X during financial year 2016-17. In simple words, when the
amount of income tax for a financial year is paid by the tax payers before expiry of the
concerned financial year, then that is called as advance income tax.
Benefits of Payment of Advance Income Tax:- The payment of advance income tax is beneficial
from the following reasons:-
1. From the point of Government, money is received in time because Government needs
money to meet its routine expenditures.
2. From the point of view of taxpayers, it is easy for him to pay the tax in installments. So
the burden of one time payment is relieved. After all, tax payer has to pay the tax now or later.
Who is liable to pay Advance Income Tax
All persons whose estimated income tax liability during financial year 2016-17 (assessment year
2017-18), is Rs.10000/= or more, are required to pay advance income tax.
Note:
If the amount of advance tax payable is less than Rs.10000/= after deduction of TDS,
then there is no need to pay advance tax. In such case the amount of tax can be deposited at the
time of filing of income tax return. For example, total tax liability of Mr. X is calculated on
estimate basis for financial year 2016-17 for Rs.16000/= and an amount of TDS is deducted for
Rs.7000/=. In this case, he need not to pay any advance income tax, since the amount of tax
payable after deduction of TDS, is Rs.9000/= i.e. less than Rs.10000/=. He can pay Rs.9000/=
any time before filing his income tax return
With effect from financial year 2012-13 (assessment year 2013-14), any senior citizens
who is not having any income from business or profession, need not to pay advance income tax.
He/She can deposit the income tax amount any time before filing his/her income tax return. In
simple words, if any senior citizen having income from salary, income from house property,
income from capital gains or income from other source but not having any income from
business or profession, is not supposed to pay advance income tax. Senior citizen means a person
who has completed 60 years during the relevant financial year. For Example Mr. X is 61 years
old. He has to pay total income tax for Rs.260000/= on his income during financial year 2016-
17. He files his income tax return on 30.7.2017. In this case, being a senior citizen, he can pay
the amount of income tax on or before 30.07.17 because he has to show the proof of payment of
income tax in the income tax return.
Due Dates for Advance Income Tax Installments for Financial Year 2016-17.
Advance Income tax is payable in installments according to the dates given below:-
Important Note for Salaried Tax-payers:- In case of salaried person, income tax is being
deducted by the employer on monthly basis and deposited on monthly basis also. It means that
total tax payable of an employee is divided in 12 months on estimate basis. In this case the
condition of payment of advance tax is not applicable.
Illustration:
Mr. X Estimates his total taxable income for Rs.500000/= for financial year 2016-17. After
considering all the deduction u/s Chapter VI-A, The amount of Income Tax liability is
Rs.25000/=. He is 45 years old. Calculate the amount of advance tax to be paid by him.
Solution:
Mr. X is supposed to pay advance income tax during financial year 2016-17 as under:-
RS.7500/=
UP TO 15.12.16 30% OF RS.25000/=
RS6250/=
UP TO 15.03.15 25% OF RS.25000/=
25000
TOTAL
How to Deposit Advance Income Tax? Advance Income Tax can be deposited with any
authorized bank by Income Tax Department. Challan No.280 is used to pay income tax amount.
Note : W.e.f. 01.04.2008 All Companies and the assessees whose accounts are supposed to be
audited U/s 44AB, are required to pay through Internet Banking (Online Payment) only.
However, any other assessee also can make payment of income tax through net-banking from his
account or from the account of any other person.
Interest for Short Payment/Non-Payment of Advance Tax Under Section 234-C
The estimate of income, made by the tax payers should be correct to the nearest for payment of
advance income tax. If the short payment of advance tax is made more than 10% of actual
income tax to be paid, then the tax payer has to pay interest on short-fall amount of income
tax under section 234C.
less than 15% of estimated tax short fall @ 1% per month for 3 months.
is less than 45% of estimated tax short-fall @ 1% per month for 3 months
is less than 75% of estimated tax short-fall @ 1% per month for 3 months
is less than 45% of estimated tax short-fall @ 1% per month for 3 months
is less than 75% of estimated tax short-fall @ 1% per month for 3 months
is less than 100% of estimated tax short-fall @ 1% per month for 3 months
Other than above, simple interest @1% is to be paid on any short-fall from 1st April of
assessment year to the date of deposit of tax by way of self assessment.
Notes:
Interest under section 234B shall not be payable if the advance tax payable is less than
Rs.10000/=
For the purpose of calculation of interest on amount of shortfall shall be rounded off to
the nearest Rs100/=, ignoring any fraction of Rs.100/=
Illustration: Estimated income tax to be paid by Mr. X for financial year 2016-17 (Assessment
year 2017-18) is Rs.50000/=. He paid Rs.5000/= on 13.06.16, Rs.8000/= on 14.09.14,
Rs.10000/= on 15.12.16 and Rs.20000/= on 10.03.17. Calculate the interest liabilities on income
tax if he pays balance amount along with interest on 12.07.2017.
Solution:
Total Total
Short
Amount Amount fall Period Interest
Due Date
Due Paid 1% P.M.
c) Interest on late of payment of advance income tax under section 234B and total amount
to be paid
941
Interest Payable for shortfall of Advance Tax Payment under section 234C
340
Interest payable on Rs.8500/= for 4 months @ 1%
9781
Total Amount of tax and interest to be deposited on 12.07.17
Note: