Do you know that we need to make tax payment in advane otherwise the tax is paid with interest. Here I’ve covered most of the details of advance tax including advance tax due dates , calculation, challan and rates.
What is advance tax payment?
Advance tax means tax payment of tax in Advance before the year end withing advance tax due dates. It is paid in accordance with provision of Income Tax Act 1961. The tax burden of tax payer get reduced by paying installment of advance tax periodically in a year instead of paying total tax at the end of the year.
What are the advance tax due dates and rates ?
Advance tax is paid in installments in different dates.
Changes in Advance Tax rates by Finance Act, 2016 for FY 2016-17
For Financial year 2016-17, the advance tax rates and due dates are made similar for both corporate and non corporate asessee, which are given as follows.
| S.No. | Installment | Due Date | Advance tax % |
| 1 | First Installment | On or before 15 th June | 15% of Advance tax payable |
| 2 | Second Installment | On or before 15 th September | 45% of Advance tax payable |
| 3 | Third Installment | On or before 15th December | 75% of Advance tax payable |
| 4 | Fourth Installment | On or before 15 th March | 100% of Advance tax payable |
It is also amended to include that if a person choose for computation of profit or gains of business on presumptive basis under section 44AD then advance tax shall be paid in one installment on or before 15th March of that financial year.
These amendments will be effective from 1st June 2016.
Advance Tax rates upto FY 2015-16
Earlier upto financial year 2015-16, the rate of advance tax were different for corporate and non corporate assessee.
| In case of Corporate Assessee – | |||
| S.No. | Installment | Due Date | Advance tax % |
| 1 | First Installment | On or before 15 th June | 15% of Advance tax payable |
| 2 | Second Installment | On or before 15 th September | 45% of Advance tax payable |
| 3 | Third Installme | On or before 15th December | 75% of Advance tax payable |
| 4 | Fourth Installment | On or before 15 th March | 100% of Advance tax payable |
| In case of Non-Corporate Assessee – | |||
| S.No. | Installment | Due Date | Advance tax % |
| 1 | First Installment | On or before 15 th September | 30% of Advance tax payable |
| 2 | Second Installment | On or before 15 th December | 60% of Advance tax payable |
| 3 | Third Installment | On or before 15 th March | 100% of Advance tax payable |
The last installment paid by Assessee on or before 15th March, but he can pay it by 31st March, it also treats as Advance tax. Where the Assessee does not pay any installment by the due date, he shall be deemed to be an Assessee in Default.
Who is liable to pay Advance tax?
All persons are liable to pay advance tax if the total tax payable during the year is Rs. 10000 or more.
Who are exempted from advance tax payment ?
- Persons whose total tax payable is less than Rs. 10,000 in a year
- Resident Senior Citizen who is of the age of 60 years or above, and does not have any income chargeable under the head “Profits and Gains of Business or Profession”.
- A taxpayer, being individual, HUF or Firm but not LLP, opting for presumptive taxation scheme u/s 44AD
How is advance tax computed ?
Advance tax is computed on the estimated total income. The taxpayer has to predict his total income at the time of payment of advance tax. On such estimated total income, normal tax rates are applied to find out the tax liability.
The taxpayer can reduce estimated allowable expenditures, rebates, deductions etc from the estimated total income. Further he can also take claim of TDS deducted, if any.
For example M/s ABC Ltd. estimates his total sales Rs. 4 Lac for the year and estimated the expenditure Rs. 3.60 Lac. Then his income would be Rs. 40,000. M/s ABC Ltd. further estimates his income from other sources will be Rs. 20,000. Then the total estimated income is Rs. 60,000. Then the total tax liability is Rs. 60,000 x 30.9 % = 18,540/- Suppose somebody (payer of Income) has already deducted TDS of Rs. 10,000 on his income. Then the net estimated tax liability is Rs. 8,540/-.
The estimated total income is calculated on the basis of past years. Suppose if our sales for the 1st quarter is 3 lac, then we can predict that the total sales for the whole year would be around 12 lac. And based on the net profit ratio of last year we can predict the net profit of this year.
The assessing officer is also empowered u/s 210(3) to pass order and issue notice of demand requiring an assessee to pay advance tax for financial year.
For the purpose of computation of advance tax the assessing officer may adopt the higher of the following.
- The total income of the latest previous year in the respect of which the assessee has been assessed under regular assessment .
- The total income returned by the assessee in any return of income for any previous subsequent to the previous year for which regular assessment has been made. Sec 209(1).
How advance tax payment is made?
Advance tax is paid in installment in accordance with section 211. Every asseessee need to pay 100% of advance tax by 15th march of the year. The payment can be made online or offline (through bank).
What are the advance tax forms or challan ?
Challan no. 280 is used of payment of advance tax for both online and offline payment.
https://onlineservices.tin.egov-nsdl.com/etaxnew/PopServlet?rKey=1671363507
How to claim credit of advance tax?
Any advance tax paid is adjusted with the total tax liability and credit shall be given to the asseessee in the regular assessment Sec 219. For example- Mr. A paid Rs. 15000 as advance tax and he computed his final ax liability at year end Rs. 40000. So, now he has to pay only Rs. 25000 as self assessment tax.
How to calculate interest for defaults in payment of advance tax u/s 234B?
Where in any financial year, an asseessee who is liable to pay advance tax has failed to pay such tax or the advance tax paid by the assessee is less than 90% of the assessed tax, the assessee shall be liable to pay interest u/s 234B.
In such cases, assessee shall pay simple interest @ 1% per month or part thereof from 1st day of April following the financial year.
The period for which the interest is payable would be the period from the 1st day of April next following such financial year to the date of determination of total income u/s 143(1). However if the regular assessment is completed, then interest is chargeable up to the date of regular assessment.
“Assessed tax” means
- For the purpose of computing interest payable u/s 140A, the tax on the total income as declared in the return;
- In any other case, the tax on total income as determined u/s 143(1) or on regular assessment as reduced by the amount of : (i) TDS or TCS (ii) relief from double taxation u/s 90 , 90A or allowed u/s 115JD, on any income which is taken into account while computing such total income.
Regular assessment means
Where in relation to an assessment year, an assessment is made for the first time u/s 147 or u/s 153A .
What is the interest for deferment of advance tax u/s 234C?
As we have seen in section 234B interest is paid for default in payment of advance tax i.e failed to pay up to 90% of the total advance tax during the year. But in case of 234C we pay interest for not paying the specified percentage of advance tax installments within due dates.
The section 234C is also amended according to amendment in advance tax rates & due dates by Finance Act 2016.
This also amended that no 234C interest is applicable if the assessee total income includes the income from Business or profession for fist time subject to some conditions. Effective from 1st June 2016.
The following computation is given for FY 2015-16, but you can modify it according to amendment for FY 2016-17.
In the case of non corporate and corporate assessees computation of interest u/s 234C shall be as follows:
Step 1: Compute total tax payable
Step 2: Computation of shortfall in installments.
| NON CORPORATE ASSESSEE | ||||
|---|---|---|---|---|
| Installments | Due Dates of installments (1) | Amount Payable not less than (2) | Advance tax paid (3) | Shortfall of advance tax (2-3)=4 |
| I | 15th September | 30% of step 1 above | XXX | XXX |
| II | 15th Deecember | 60% of step 1 above | XXX | XXX |
| III | 15th March | 100% of step 1 above | XXX | XXX |
| CORPORATE ASSESSEE | ||||
| Installments | Due Dates of installments (1) | Amount Payable not less than (2) | Advance tax paid (3) | Shortfall of advance tax (2-3)=4 |
| I | 15th June | 15% of step 1 above | XXX | XXX |
| II | 15th September | 45% of step 1 above | XXX | XXX |
| III | 15th Deecember | 75% of step 1 above | XXX | XXX |
| IV | 15th March | 100% of step 1 above | XXX | XXX |
Step 3: Computation of interest @ 1% on the shortfall
| Due date of installments | Non-Corporate Assessees | Corporate Assessees |
|---|---|---|
| 15th June | Not applicable | 3 month x 1% x shortfall of tax |
| 15th September | 3 month x 1% x shortfall of tax | 3 month x 1% x shortfall of tax |
| 15th December | 3 month x 1% x shortfall of tax | 3 month x 1% x shortfall of tax |
| 15th March | 1 month x 1% x shortfall of tax | 1 month x 1% x shortfall of tax |
If the shortfall in the payment of tax due on the returned income is on account of under estimation or failure to estimate :
- Capital Gains or
- Winning form lotteries, crossword puzzles, races ( including horse races) card games and any other activity of gambling, betting etc.,
and if the assessee had paid the whole amount of tax payable in respect of the above mentioned income as part of the remaining installments of advance tax which are due or where no such installments are due, by 31st march of the financial year, no interest u/s 234C shall be leviable in respect of such shortfall.
So friends don’t forget to pay the advance tax within advance tax payment due dates. For any query please comment.
CA Harish Negi
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what if we do not pay advance tax at all. is there any penalty for that ?
Yes, while submitting self assessment tax the interest charges will be added to total tax payable.
This was a dumb question.
Don’t make jokes on other question, it may be possible that some of your doubt may make you laugh for others
Thanks for the explanation. I request one clarification though.
Suppose I my advance tax payment falls short on 15th Sep. Is it possible to reduce interest liability to just one month if I remit the shortfall by 15th Oct? Or, is the interest calculated for 3 months irrespective of subsequent payments before 15th Dec?
A taxpayer being an individual, HUF or Firm but not LLP opting for presumptive taxation scheme u/s 44ADD shall be exempted from advance tax payment.
What is the meaning of LLP, here?
LLP means Limited liability partnership. It is like a partnership firm where the liability of partners is limited to the contribution they made as capital.
I am an NRI. I have not paid advance tax for AY 2016-17. Can I pay it now before 31st March 2017? If yes, the procedure for paying the same. Thanks.
Hi, advance tax is paid upto 15th march of financial year. Now you can pay self assessment tax to save interest. .
You can use this link https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
and choose challan no 281, then tax for non corporate assessee and then choose self assessment tax.
I have recently changed my company from 1st December 2016.
My previous employer maintained financial year as March to February.
But my current employer maintains financial year as April to March.
Previous employer has submitted tax from March to November (total of 9 months, I was there for that tenure),
where as curent employer has submitted tax from December(my joining month) to March (total of 4 months).
As a result, in TRACES, it’s showing 13 months salary as expected as my previous employer starts financial year 1
monthn early than normal.
Here what should I do?
1. Should I pay tax on basis of 13 month’s salary?
2. If I pay tax on 13 month’s salary, will I get deduction like house rent, PF, Medical, Transport and all other heads on 13 months basis.
I am in confusion.
Please help.
Hi
I’ve invested in tax saver for the assessment year 2017 – 18. But it was delayed by a month by the agent, it was made only on April 17.
Please tell me am I to make tax payment with penalty.
I am a senior citizen, falling in the slab of 5L-10.
How to make tax payment now. I am in Netherlands now.
Please advise.
Regards
S G Ramesh.
Hi I am gov employee. I didn’t paid my advanced tax for the month of March *ie final installment before 15th march . Is there any way I can pay tax without interest?