2 Advance Tax Compliance under Income Tax Act, 1961

Advance Tax refers to Income tax collected in advance from the taxpayer for the year before the end of the concerned financial year.

Advance Tax is payable by the taxpayer during a financial year in every case where the amount of tax payable exceeds Rs 10,000/-

Advance Tax is calculated on the basis of expected tax liability of the year.

Advance Tax is to be paid in following instalments:-

1. In case of all taxpayers( other than taxpayer taxable u/s 44AD and 44ADA)

15% of the estimated tax payable On or before 15th June
45% of the estimated tax payable On or before 15th September
75% of the estimated tax payable On or before 15th December
100% of the estimated tax payable On or before 15th March

2. In case of taxpayer taxable u/s 44AD and 44ADA

100% of the estimated tax payable On or before 15th March

Note: – Advance Tax paid before 31st March is also treated as advance tax.

Failure to pay Advance Tax

Interest is levied u/s 234B and 234C for failure of payment of Advance Tax

Interest u/s 234B is levied on following 2 cases:-

1. When the taxpayer has failed to pay advance tax

2. When advance tax paid by the taxpayer is less than 90% of the final tax payable at the time of filing return

The Interest Is levied on balance amount of tax not yet paid at the rate of Interest u/s 234B is 1% per month simple interest from 1st day of assessment year till the time of payment of balance tax.

Interest u/s 234C is levied for delay in payment of instalments(s) of advance tax which will be levied in following cases:-

1. If advance tax paid on or before 15th June is less than 12% of advance tax payable

2. If advance tax paid on or before 15th September is less than 36% of advance tax payable

3. If advance tax paid on or before 15th December is less than 75% of advance tax payable

4. If advance tax paid on or before 15th March is less than 100% of advance tax payable

5. In case of taxpayers who opted for presumptive taxation scheme of Section 44AD or section 44ADA interest shall be levied if advance tax paid on or before 15th March is less than 100% of advance tax payable.

No Interest u/s 234C is levied if shortfall of advance tax is due to capital gains or winnings from lottery or dividend and the taxpayers pays the same in the immediate following installment

Interest under section 234C is levied @ 1% per month simple interest for a period of 3 months, in case of short fall in payment of 1st, 2nd and 3rd installment and for 1 month, in case of short fall in payment of last installment.

Interest under section 234C is levied on the short paid amount of installment(s) of advance tax.

Advance Tax Compliance under Income Tax Act, 1961

Things to keep in mind while paying Advance Tax

1. Challan number for paying advance tax is ITNS 280

2. Select Advance Tax- Number 100

3.  Properly select the Assessment year

4. Amount and mode of payment of tax

5. Most Important- PAN Number of taxpayer

How to know if Advance Tax paid is deposited or not

In case of online payment, challan of payment is generated with CIN number

In case of offline payment through bank, the counter-foil of the Income-tax Challan filled by taxpayers, should be stamped and returned by the bank. Please ensure that the bank stamp contains BSR (Bankers Serial number code), Challan Identification Number (CIN) and the date of payment.

After payment, the same can be checked by viewing your 26AS through login into Income tax portal

Disclaimer:-

The above note is only for reference purpose, you shall consult a tax professional for advice on same. For any queries the author can be reached at vaibhav.chheda8@gmail.com

Author Bio

Qualification: CA in Practice
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Location: Mumbai, Maharashtra, India
Member Since: 06 Mar 2022 | Total Posts: 3
CA in practice since 2015, gained experience in the filed of Taxation. Currently associated with Kamal Dhanuka & Co as a partner View Full Profile

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