ADVANCE TAX

Definition - Sec. 2(1)

advance tax means the advance tax payable in accordance with the provisions of Chapter XVII-C

Obligation to pay advance tax

Sec. 4(2)
In respect of every income chargeable to tax income-tax shall be paid in advance If mandated under any provision of this Act.

When payment to be made

Sec. 190(1) Even though the regular assessment is to be made in a later assessment year the tax on such income shall be payable by advance payment

Sec 207
Tax is payable in advance during the financial year In accordance with the provisions of Sec. 208 to 219 In respect of total income which is chargeable to tax for the A Y immediately following the F Y Such income will in this chapter be referred to as current income

Condition of Liability to pay tax - Sec 208

Advance tax is liable to be paid in every case where the amount of tax payable by the assessee during the financial year as computed in accordance with this Chapter is ten thousand or more

Computation of advance tax by assessee - Sec 209

Assessee shall first estimate his current income Calculate income tax thereon at the rates in force in that financial year The amount of income tax deductible/collectible (i.e. TDS/TCS) at source will be deducted and the balance is the advance tax.

. Contd.
If net agricultural income is also to be taken to calculate advance tax, then the same shall also be estimated and included in the current income and tax calculated accordingly.

Computation of advance tax by AO - Sec 209 & Sec210

If calculations are made by the assessing officer, then
the income assessed for the latest previous year by way of regular assessment or the returned income of the assessee for a subsequent previous year

whichever is higher shall be treated as current income

. Contd.
Advance tax shall be determined after reducing the income tax deductible/collectible (i.e. TDS/TCS) at source. AO must pass an order in writing specifying the various installments in which the advance tax is payable (Sec210(3)). A demand notice u/s 156 should be issued to the assessee

. Contd.
The demand notice shall be in Form No.28. AO can pass the above order only in case of assesses who have been earlier assessed by way of regular assessment Such order can be passed during the previous year but not later than last day of February

Revised order by AO Sec.210(4)

Order passed u/s 210(3) can be revised if Subsequent to order u/s 210(3) but before March 1st of the F Y Assessee furnishes a return for later year with higher income or Regular assessment is completed for a later year with higher income

.Contd.
Then assessee will have to pay taxes as per the revised order of the AO for the remaining installments

Lower estimate by assessee Sec.210(5)

On receipt of the order of the AO Assessee can submit to the AO his own estimate of lower current income and hence lower advance tax liability and Pay taxes accordingly Intimation to AO shall be in Form No. 28A

Higher estimate by assessee Sec.210(6)

If the advance tax on current income as estimated by the assessee is higher Than the specified tax in the order of the AO Then assessee will pay taxes as per his own estimate

Instalments of Advance tax

Due Dates On or before 15th June On or before 15th Sept On or before 15th Dec For Companies Not less than 15% Not less than 45% Not less than 75% For other than Companies Not less than 30% Not less than 60% Not less than 100%

On or before Not less 15th March than 100%

Payments by cheques
Date of encashment of cheque will be the date of payment of tax Circular : No. 141, dated 23-71974.