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Payment of Tax

Jun 10, 2022

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Payment of Tax – Advance Tax

It means that when the income tax is paid in advance instead of the lump sum payment which is made at the end of the year. Another name for it is “Pay as you earn Tax”. The payments which are made in this are made in instalments. 

Individual who is liable to pay Advance Tax is as 

  • Salaried, Freelancers and businesses: If in case one’s total tax liability is Rs. 10,000 or high in the financial year then one has to pay advance tax. This type of tax is applied to all taxpayers, freelancers, salaried and businesses. The senior citizens who are 60 years old or above and don’t run any kind of business are exempt from paying up advance tax.
  • Presumptive income for Businesses: The one who has taken the presumptive taxation scheme which is under Section 44AD needs to pay the whole amount of the advance tax due in only one instalment on or before 15th March. They also get the option to pay all the tax dues by 31st March. 
  • Presumptive income for Professionals: Professionals such as lawyers, architects, doctors and many more like these is taken care of under Section 44ADA. Additionally, they have to pay the whole of their advance tax liability in one instalment (that is, on or before 15th March). 

Also, the entire amount can be paid by 31st March.

  1. The Due dates for payment of Advance Tax are as:

(For both individual and corporate taxpayers)

Due Date Advance Tax Payable
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax less advance tax already paid
On or before 15th December 75% of advance tax less advance tax already paid
On or before 15th March 100% of advance tax less advance tax already paid

 

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    1. For individuals who have opted for the Presumptive Taxation Scheme which is under the Section 44AD & Section 44ADA (Business Income)

     

    Due Date Advance Tax Payable
    On or before 15th June 15% of advance tax
    On or before 15th September 45% of advance tax less advance tax already paid
    On or before 15th December 75% of advance tax less advance tax already paid
    On or before 15th March 100% of advance tax less advance tax already paid

     

    1. The interest which is charged on the Late Payment of the Advance Tax

    The interest with respect to the late payment is set at 1% on the amount of the due tax. It is calculated from the individual cut-off dates shown above, till the date of actual payment of outstanding taxes.

     

    Interest under section 234B

    This is applied under the Section 234B and is applicable under the following condition:

    • When the tax liability after deducting the TDS for a given financial year is more than the Rs. 10,000 and one doesn’t need to pay any advance tax

                                                     Or,

    When one has paid advance tax but it is less than 90% of the ‘assessed tax’.

    With respect to any of the described cases above the interest rate under Section 234B is applicable. The interest is calculated at @1% on Assessed Tax subtracting the Advance Tax. A part of the month is rounded off to the full month and the amount on which the interest is calculated is not rounded off in a way that any fraction of hundreds is ignored.

    Interest under section 234C

    The interest on delayed payment of advance tax in case of a taxpayer other than the one opting for presumptive income u/s 44AD is as below.

     

    Particulars Rate of Interest Period of Interest Amount on which interest is calculated
    If Advance Tax paid on or before June 15 is less than 15% of the Amount* Simple interest @1% per month 3 months 15% of Amount* (-)tax already deposited before June 15
    If Advance Tax paid on or before September 15 is less than 45% of the Amount* Simple interest @1% per month 3 months 45% of Amount* (-) tax already deposited before September 15
    If Advance Tax paid on or before December 15 is less than 75% of the Amount* Simple interest @1% per month 3 months 75% of Amount* (-) tax already deposited before December 15
    If Advance Tax paid on or before March 15 is less than 100% of the Amount* Simple interest @1% per month 100% of Amount* (-) tax already deposited before March 15

     

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    Circumstances under which Interest on Advance Tax is not Payable

    Some points that have to be taken care of are as follows under this section are:

    • In a situation when there is any shortfall in the payment of advance tax due then no interest is payable. (if it is on account of underestimation or failure to estimate the number of capital gains or speculative income (lottery income, gambling income, etc).
    • The individual taxpayer who has paid in full, then the tax payable with respect to the income mentioned above while paying remaining instalments of advance tax due, or if no instalment is due, the taxpayer pays them before the end of the financial year.
    1. Self Assessment Tax

    If one has annual tax dues which are exceeding Rs. 10,000 then one must pay income tax in advance. It is usually the case with respect to the salaried individuals, and employers who should take care of the income tax payments via the TDS deductions.

    The steps are as follows:

    1. One should all income from all the sources which include salary income, interest income, capital gain and many more. I suppose one is a freelancer, then one can estimate one annual income from all the clients & deduct expenses. Some expenses like rent of one’s workplace, internet & mobile bills, depreciation on computers and electronic items, and travel are some the examples.
    2. The next step is to reduce the deduction which one wants to claim from one’s total income & get the taxable income on one’s income tax return. The deduction comes under Section 80C, 80D, 80E and others that one wants to claim.
    3. One has to apply under the latest income tax slabs rates which are applicable. Then one has to reduce any TDS that one may have deducted from the total tax which is due.

    Another point has to take care that one must pay according to the instalment and can easily make payment online.

    1. Submit the Income Tax Return when one has paid all the dues. There are times when one may see tax payable at the time of filing your return. This is known as Self Assessment Tax which one has to pay online as to ensure successful e-fling. One should pay the interest which is under the Section 234B and 234C with net tax dues (given that if one is paying tax after 13th March)
    2. Tax on Regular Assessment

    There are times when one has to make income tax payments to comply with an income tax demand notice. And if one agrees with the assessing officer and is ready to pay for the demands which have been put up then one does online too. This is called Tax on regular assessment.

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