Advance Tax under Income Tax

CA. Ajay Khandelwal

Here we are discussing provisions related to payment of Advance Tax under Income Tax Act. If the tax is required to be paid within the same year itself, i.e., before the year end, then it is called advance tax.

Who has to Pay Advance Tax

Any assessee, whose net tax payable (after deducting TDS) for any year is likely to exceed Rs. 10000/-, is liable for Payment of Advance Tax under Income Tax provisions. But, it is difficult to predict what will be the net tax payable for the year. So, it is paid normally on estimate basis.

Exemption to Senior Citizens

A senior citizen who is not having business or professional income, is not liable to pay Advance Tax. A senior citizen is that person who has attained 60 years of age at any time during the year under question.

Due Dates for Payment of Advance Tax

Advance Tax is required to be paid in 4 installments as below :

 Installment No.Due date of Payment Amount as % of Total Advance Tax 
 I15th June15% 
 II15th September 45% 
III  15th December 75%
 IV 15th March 100%

For example, suppose Net Tax Payable for a person is estimated to be Rs. 20000/-. So, his total advance tax payment should be Rs. 3000/- upto 15th June, Rs. 9000/- upto 15th September, Rs. 15000/- upto 15th December and whole Rs. 20000/- upto 15th March.

Special Provision for 44AD and 44ADA assessees

A person falling under presumptive taxation u/s 44AD or 44ADA, is not required to pay first 3 installments of Advance Tax. But, he is required to pay the IV installment, i.e., 100% of advance tax upto 15th March.

Consequences of Non-payment of Advance Tax

There are no penalty for non-payment of Advance Tax. But, there are provisions for payment of interest on the same. These are covered under Section 234B and 234C. Section 234B provides for payment of 1% per month simple interest after 31st March on the amount remaining unpaid upto 31st March. And section 234C provides for payment of 1% per month simple interest on amount remained unpaid in a particular installment for a period upto the next instalment.

Relaxation in case of Capital Gains or Casual Incomes

If a person earns some capital gain income or such casual income, like lottery, etc., then for such income he is required to pay only that installment of advance tax, which fall after the date of earning of such income. Because, such income can’t be predicted in advance. For example, if a person sells property on 1st December and earns some capital gain income. So, he can pay the installments of 15th December and 15th March only and there is no interest liability for 15th June and 15th September installments.

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