The Income Tax Department, as required by the law, is asking all the eligible taxpayers to pay the 3rd instalmemt of their advance tax by 15th December, 2017.

Haven’t paid your advance tax yet? Hurry up as very little time is left. The Income Tax Department, as required by the law, is asking all the eligible taxpayers to pay the 3rd instalmemt of their advance tax by 15th December, 2017. “Income tax brings growth. Income tax brings prosperity. Pay it to get it,” says the Tax Department in its latest campaign. It is also in your own interest to pay the required advance tax on time.

Otherwise, you should be prepared to face penalty as per the Income Tax Act.

What is Advance Tax?

Advance Income Tax is a mechanism for the government to collect income tax revenue on a regular (quarterly) basis. The other widely known mechanism is TDS. Though TDS is very effective mechanism, it is used in combination with advance tax as certain incomes are not subject to TDS and further in many cases the rate of TDS is less than the rate at which the income is taxed in the hands of a taxpayer.

Who are liable to pay advance tax?

According to the Income Tax Act, the following individuals/entities are liable to pay advance tax:

# As per section 208, any assessee, including salaried employee, whose tax liability for the financial year is Rs 10,000 or more, is liable to pay his tax in advance, in the form of ‘advance tax’. However, section 207 gives relief from payment of advance tax to a resident senior citizen. As per section 207, a resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession, is not liable to pay advance tax.

# Assessees in respect of eligible business referred to in section 44AD and 44ADA are liable to pay the whole amount of such advance tax on or before 15th March of the respective financial year.
How is advance tax calculated and paid?

Advance tax is to be calculated on the basis of expected tax liability of the year. It is to be paid in instalments as given below:
(a) In case of all the assessees (other than the eligible assessees as referred to in section 44AD and 44ADA) :

(b) In case of eligible assessee as referred to in section 44AD and 44ADA:
Up to 100 per cent – On or before 15th March
Modes of Payment

# e-payment is mandatory for all corporates and also for those assessees whose accounts are required to be audited u/s 44 AB of the Income Tax Act.
# e-payment is convenient for other taxpayers also as it ensures correct credit.
Schedule for payment of advance tax
a) On or before 15th of December 2017 – 75% of the Advance Tax is payable
b) On or before 15th of March 2017 – 100% of the Advance Tax is payable
Penalty
A taxpayer who is liable to discharge part of its tax liability by way of advance tax has to bear additional burden of interest for default of advance tax, in case total advance tax paid for the year falls short of the assessed tax by ten percent or more. This interest is levied as per the provisions of section 234B of the Income-Tax Act, 1961. Such taxpayers are further liable to pay interest for deferment of advance tax, in case any quarterly instalment of advance tax paid falls short of the prescribed percentage of total advance tax paid. This interest is levied in accordance with the provisions of section 234C of the Act.