It was a Sunday and you may have forgotten the advance tax deadline of March15. Wondering what will be the impact? Do not worry- you can still pay and comply. But before rushing to pay your tax, understand how it all works.
Advance tax is based on the principle of “pay as you earn”. It is collected even before the income tax becomes payable and the installments are payable during the financial year itself.
Advance Tax is payable only when the amount of income tax payable by the assessee during that year is Rs.10,000 or more. Resident individuals who are over 60 years of age (senior citizen) and do not have business income are not required to pay advance tax. Further, no advance tax is payable in case of assessees covered under section 44AD (presumptive taxation). Corporate assessees liable to pay tax on the basis of Book Profit (MAT) are required to pay advance tax.
Advance tax is payable only on estimate basis. While computing liability for advance tax, income-tax calculated on the current income estimated by the assessee shall be reduced by TDS deducted / TCS collected, MAT /AMT credit, relief under tax-treaty. After making payment of first/second instalment of advance tax, the assessee can revise the remaining instalment(s) of advance tax in accordance with his revised estimate of current income and pay tax accordingly.
The Income Tax Act has given a scheme of payment i.e., four instalments in case of companies i.e., 15th June, 15th September, 15th December, and 15th March and three installments for non-corporate assesses i.e. 15th September, 15th December and 15th March. As per the CBDT Circular No. 676 of 1994 if the last day for payment of any instalments of advance tax is a day on which the receiving bank is closed, the taxpayer can make the payment on the next immediately following working day, and in such cases, the mandatory interest leviable under section 234B and section 234C would not be charged. Where payment of advance tax is made by a cheque, the date of payment of advance tax in such case would be the date of the presentation of the cheque and not the date of clearing, if it is not dishonoured.
All incomes (including capital gains, winnings from lotteries, crossword puzzles, etc.) are liable for advance tax. However, it is not usually possible for an assessee to estimate his capital gains or winnings from lotteries, etc. Thus, in such cases, it is provided that if any such income arises after the due date of any installment, then, the entire amount of tax payable (after deduction of TDS, if any) on such capital gain or casual income should be paid in remaining installments of advance tax which are due or where no such installment is due, by 31st March of the relevant Financial Year. If the entire amount of tax payable is so paid, then no interest on late payment will be leviable.
In case, the assessee has not paid any advance tax or paid advance tax but which is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest @ 1% per month from first day of April following the financial year, under section 234B.
Likewise, in case the payment of advance tax is deferred beyond the due dates as per the prescribed limits, interest @1% per month, for a period of 3 months, will be payable for every deferment, except for the last installment of 15th March where it will be 1% for one month, under section 234C .