Advance tax is a significant aspect of income tax regulations that often raises various questions among taxpayers. This comprehensive guide aims to address common queries and uncertainties surrounding advance tax. From understanding the process of revising income estimates to exploring exemptions and payment methods, this article covers essential information for individuals, businesses, and taxpayers. Whether you’re new to advance tax or seeking clarity on specific scenarios, read on to find the answers you need.
Q1. Can an assessee revise their estimate of income without any compliance?
Yes, an assessee can revise their estimation of income and pay advance tax before the specified due dates without any requirement of filing the estimation of income with the I-T department.
Q2. Can an estimate of income be revised after making payment of the first/second installment of Advance Tax?
Yes, an assessee can revise the remaining installment of advance tax in accordance with their revised estimate of current income and pay the advance tax accordingly.
Q3. What will be the due date for payment of advance tax if the same is payable by virtue of an order from the AO?
Where advance tax is payable due to the notice of demand issued by the Assessing Officer, then whole or part of the advance tax is payable in the remaining installments, i.e., installments due during the financial year after the date of notice.
Q4. Who is not required to pay Advance tax?
A resident senior citizen (i.e., an individual of the age of 60 years or above during the financial year) not having any income from business or profession is not liable to pay advance tax. Taxpayers who opted for presumptive taxation scheme of section 44AD or section 44ADA are liable to pay 100% of advance tax by 15th March.
Q5. Can I claim the deduction of Advance tax payments against my profits?
No, Advance Tax is not an expense. It is considered as an asset and adjusted against one’s tax liabilities at the time of finalization of the Balance Sheet. It is a charge on income and not considered as an expenditure. It is shown under Loans and Advances in the Balance Sheet.
Q6. What to do if I forgot to bifurcate the amount of tax, surcharge and Cess while making the online payment?
Showing the total tax liability as Income tax, Education cess, Surcharge, etc., is advisable. However, in the event the failure to do bifurcation of tax payment into income-tax, surcharge, Cess, etc., due to any reason, there is no need to panic. While filing the income-tax return, just mention the total amount in the income-tax column and that would be sufficient. However, at the time of filing the income-tax return, you should fill up the correct bifurcation details and then CPC will check it properly at the time of processing.
Q7. How long does it take for Advance Tax payment to reflect in Form 26AS?
It takes 3-4 working days for Advance Tax payment to reflect in Form 26AS after payment is made. The bank uploads challan details to TIN in 3 working days after the realization of the tax payment online. After the bank uploads the details of self-assessment/advance tax to TIN, it is automatically posted into the assessee’s Form 26AS.
Q8. What should be kept in mind while making payment of tax?
While making payment of tax, you should clearly mention the following details:
i) Head of payment, i.e., Corporation Tax/Income-tax (other than companies),
ii) Amount and mode of payment of tax,
iii) Type of payment (i.e., Advance tax, Self-assessment tax, Tax on regular assessment, Tax on Dividend, Tax on distributed Income to Unit holders, Surtax),
iv) Assessment year, and
v) The unique identification number called as Permanent Account Number (PAN) allotted by the I-T Department.
All the above details are displayed on screen and should be confirmed before proceeding with payments.
Q9. How to compute advance tax on capital gains income?
Advance tax is payable on total income which includes capital gains and casual income (i.e., income from lotteries, crossword puzzles, etc.). However, it is practically not possible to estimate the income from capital gain and casual income in advance. Therefore, in such cases, if any such income arises after the due date of any installment, then the tax calculated on capital gain and casual income shall be paid in remaining installments of advance tax which are due. If the entire amount of advance tax is paid on or before the specified due date, then no interest for late payment of advance tax is levied.
Q10. When is an assessee considered as an assessee-in-default in case of advance tax?
For the purpose of advance tax, an assessee will be considered as an assessee-in-default if he/she does not pay the advance tax on receiving the order from the Income-tax officer as per the due dates or does not file an intimation in Form 28A before the installment due date.
Q11. What should we do if the bank is closed on the last day for payment of advance tax?
Any taxes paid till 31st March will be treated as advance tax. If the last day for the payment of advance tax installment is the day on which the banks are closed, then you should pay the advance tax on the immediately following working day and no interest shall be charged on such payments of advance tax. However, tax can be paid through online mode, through internet banking, debit card, etc.
Q12. Does credit of TDS allowed while calculating advance tax?
As per section 208 of the income-tax Act, 1961, every person whose estimated tax liability for the year is INR 10,000 or more, after TDS (taxes deducted at source), shall pay advance tax. Therefore, credit of TDS is to be taken into consideration while calculating the advance tax liability. However, if the amount is given or credited by the payer without deduction of tax, then the benefit of TDS cannot be considered while calculating the advance tax liability.
Q13. Who is responsible to file Form 28A?
A: In case the Assessing Officer’s estimation of current income is more than the assessee’s estimate, then the assessee is required to file an intimation in Form 28A giving an estimate of income and advance tax.
The estimation is required to be filled and signed by a person who is authorized to sign a return of income:
i) In case of a registered firm, the firm has to submit the estimate of advance tax payable, if any.
ii) The individual partners have also to submit an estimate of the advance tax payable by each partner, including therein the share of income from the registered partnership firm.
iii) In case of an HUF, which has no member and whose total income of the previous year is likely to exceed the maximum amount not chargeable to income-tax, then a declaration is required to be filed from all members.
Q14. What is Form 28A?
In case the Assessing Officer’s estimation of current income is more than the assessee’s estimate, then he/she is required to send an intimation in Form 28A giving an estimate of such reduced income and advance tax. The form 28A is prescribed under Rule 39 of the Income-tax Rules.
Q15. What should you do if your actual income is more than what the tax officer determined in the notice of demand?
If you believe your advance tax liability is lower than what the income-tax officer calculated, you can file an estimation of your income and the amount of tax payable in Form 28A to the Assessing Officer.
Alternatively, if the tax demand calculated by the income-tax officer is lower than the tax liability you computed, you should pay the advance tax as per your own computation. No intimation to the income-tax officer is required in such cases.
Q16. Which tax rates should you use to compute advance tax liability?
For computing the advance tax liability, you should use the prevailing tax rates or the rates in force of the previous year for which the advance tax is to be computed.
Q17. When is the Assessing Officer liable to determine the Advance tax liability?
If you have a legal obligation to pay advance tax and fail to make payment or the advance tax is lower than the correct amount, the Assessing Officer may pass an order asking you to pay tax on your current year income.
Such order should be passed anytime during the previous year but before 1st March, i.e., by 28th February.
Q16. What is the procedure for computing advance tax?
Advance tax is liable to be paid in every case where the advance tax payable is Rs 10,000 or more. A Resident Senior citizen not having any income from business/profession is not liable to pay advance tax.
An assessee who opts for the presumptive taxation scheme under section 44AD and section 44ADA is required to pay advance tax related to such business. However, advance tax can be paid during the financial year (immediately preceding to the assessment year) on or before March 15.
The computation of advance tax can be done in the following manner:
1. Income from salaries
2. Income from house property
3. Income from Capital Gains
4. Income from Business or Profession
5. Income from other sources
6. Gross Total Income (Total 1 to 5)
7. Less: Deductions under sections 80C to 80U
8. Net Income (7-6)
9. Income Tax on Net Income
10. Less: Rebate under section 87A
11. Balance (10-9)
12. Add: Surcharge, if any
13. Total (11+12)
14. Add: Health and Education Cess @4%
15. Total (13+14)
16. Less: i) Relief under section 89, 90, 90A or 91
ii) Pre-paid taxes (i.e. advance tax, self-assessment tax, TDS, TCS, MAT/AMT credit)
17. Advance Tax Liability (17-16)
Q17. What is the due date for payment of Advance tax and Self Assessment tax?
Payment of income-tax on self-assessment should be done by the assessee before the date of filing of return of income. The payment made after the due date of filing return of income attracts interest under section 234A.
The due dates for payment of different instalments of advance tax are as follows:
i) For assessees (other than those covered under section 44ADA of the Income-tax Act, 1961)
a) On or before 15th June 15% of advance tax;
b) On or before 15th Sept 45% of advance tax;
c) On or before 15th Dec 75% of advance tax; and
d) On or before 15th March 100% of the advance tax
ii) Assessees covered under section 44AD and section 44ADA (under presumptive taxation scheme) of the income-tax Act, 1961, are required to pay advance tax on or before 15th March.
Q18. Who is liable to pay Advance tax?
Every person (individual, firm, company, etc.) whose estimated tax liability for the year after TDS is Rs 10,000 or more shall pay its tax for the year in advance during the same financial year. Such tax shall be paid in instalments. Individuals having only salary income are not required to pay advance tax as the liability to deduct and deposit tax is on the employer making such payment in the form of TDS.
Q19. Can payment of advance tax be made through any bank account?
It is not necessary to make the payment of taxes from your own account in an authorized bank. You can make the payment from the account of any person. However, the challan for making such payment must clearly indicate your Permanent Account Number on whose behalf the payment is made.
Conclusion
Navigating the complexities of advance tax can be challenging, but armed with the right knowledge, you can ensure compliance and manage your tax obligations effectively. Remember that advance tax requirements may vary based on your income sources, business type and circumstances. If you’re unsure about any aspect of advance tax, consulting a tax professional is always advisable. Stay informed, make timely payments and keep accurate records to ensure a smooth experience with advance tax.