Under Section 208 of Income-tax Act, every assessee is required to pay advance tax if the tax liability for the previous year exceeds ten thousand rupees. In case of senior citizens who have passive income of the nature of interest, rent, etc., the requirement of payment of advance tax results in raising compliance burden.

In order to reduce the compliance burden of such senior citizens, it is provided from Financial Year 2012-13 under Section 207 that a resident senior citizen (i.e., an individual of the age of 60 years or above) , not having any income chargeable under the head “Profits and gains of business or profession”, shall not be liable to pay advance tax and such senior citizen shall be allowed to discharge his tax liability (other than TDS) by payment of self assessment tax.

In other words, if a person satisfies the following conditions, he will not be liable to pay advance tax:

  1. He is an individual
  2. He is resident in India as per the Income-tax Act
  3. He is of the age of 60 years or above at any time during the year
  4. He is not having any income chargeable to tax under the head “Profits and gains of business or profession”

Some practical problem and solutions

Question- 1 – Mr. Kapoor (resident and age 65 years) is a retired person, earning rental income of Rs. 40,000 per month. Apart from rental income, he does not have any other source of income. Will he be liable to pay advance tax?

Answer– In this case Mr. Kapoor is a resident as per Income-tax Law. His age is 65 years and he is not having any income chargeable to tax under the head “Profits and gains of business or profession”. Thus he will not be liable to pay advance tax.

Question- 2 Mr. Sunil (resident and age 56 years) is a retired person, earning rental income of Rs. 40,000 per month. Apart from rental income he does not have any other source of income. Will he be liable to pay advance tax?

Answer– In this case Mr. Sunil is a resident as per Income-tax Law. His age is 56 years and he is not having income chargeable to tax under the head “Profits and gains of business or profession”. He satisfies all the conditions except the age criteria of 60 years and, hence, he will be liable to pay advance tax. In other words, Mr. Sunil is not a senior citizen as per the Income-tax Law and, hence, he is not exempted from payment of advance tax.

Question 3 – Mr. Mohan (resident and age 61 years ) is a retired person earning rental income of Rs. 40,000 per month. After retirement from his job, he started his own business of provision shop. Will he be liable to pay advance tax?

Answer– In this case Mr. Mohan is a resident as per Income-tax Law. His age is 61 years and he is having income chargeable to tax under the head “Profits and gains of business or profession”. He satisfies all the conditions except the business/profession income criteria. Hence, he will be liable to pay advance tax. In other words, Mr. Mohan will be liable to pay advance tax because he is having income chargeable to tax under the head “Profits and gains of business or profession”.

Question 4 Mr. Raja (a non-resident and age 63 years) is a retired person, earning rental income of Rs. 40,000 per month from a property located in Delhi. He is residing in Canada. Apart from rental income, he does not have any other source of income. Will he be liable to pay advance tax in India?

Answer- The exemption from payment of advance tax is available to a resident individual who is of the age of 60 years or above and who does not have income chargeable to tax under the head “Profits and gains of business or profession”. In this case, Mr. Raja is a non­resident as per Income-tax Law, and, hence, he cannot claim the benefit of exemption from payment of advance tax. In other words, Mr. Raja will be liable to pay advance tax.

Question 5-  Essem Enterprises, a partnership firm, owns a property in Delhi. The property is given on rent of Rs. 40,000 per month. Apart from rental income, the firm is not having any source of income. Will the firm be liable to pay advance tax?

Answer- The exemption from payment of advance tax is available to a resident individual who is of the age of 60 years or above and who does not have income chargeable to tax under the head “Profits and gains of business or profession”. In this case, the taxpayer is a partnership firm and, hence, the exemption will not apply to it, thus, the firm will be liable to pay advance tax.

(Republished with Amendments)

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