Income Tax Act, 1961: Sections 207-219 – Advance Tax Provisions & Analysis

Introduction:

Navigating the intricacies of the Income Tax Act, 1961, specifically Sections 207 to 219, is crucial for taxpayers aiming to comprehend Advance Tax provisions. These sections delineate the framework for timely payment, computation, and liabilities associated with advance tax. This comprehensive analysis aims to demystify these sections, offering insights to navigate the complex landscape of Advance Tax obligations effectively.

Section 207 to 219 of Income Tax Act,1961 : Advance Tax – Provisions, due dates & analysis

Navigating the intricacies of Income Tax Act, 1961, Sections 207 to 219 is imperative for taxpayers seeking clarity on Advance Tax. These provisions dictate the timely payment, computation, and liabilities associated with advance tax. Section 207 establishes the liability framework, while Section 208 sets conditions triggering payment. Section 209 delves into computation methods, and Section 210 outlines due dates and instalment flexibility. Understanding the implications of Sections 214, 215, and 216 on interest payments is crucial. Section 218 defines defaults, and Section 219 governs the crediting of advance tax. This detailed analysis aims to demystify these sections, offering taxpayers comprehensive insights to navigate the complex landscape of Advance Tax obligations effectively.

Section 207 to 219 of Income Tax Act,1961: Advance Tax

1. Section 207: Liability for Payment of Advance Tax

1. Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as “current income”.

2. The provisions of sub-section (1) shall not apply to an individual resident in India, who—

• does not have any income chargeable under the head “Profits and gains of business or profession”; and
• Is of the age of 60 years or more at any time during the previous

Analysis:

For computation of advance tax assessee has to follow section 208 to 219 of Income Tax Act, 1961. And such Advance tax is calculated on Current Income only.

2. Section 208: Conditions of Liability to Pay Advance Tax

Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is 10,000/- or more.

Analysis:

Advance Tax becomes payable only when such tax is Rs. 10,000/- or more.

3. Section 209: Computation of Advance Tax

1. The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of sub-sections (2) and (3), be computed as follows, namely :—

a) where the calculation is made by the assessee for the purposes of payment of advance tax under sub- section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, he shall first estimate his current income and income-tax thereon shall be calculated at the rates in force in the financial year;

b) where the calculation is made by the Assessing Officer for the purpose of making an order under sub-section (3) of section 210, the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment or the total income returned by the assessee in any return of income furnished by him for any subsequent previous year, whichever is higher, shall be taken and income-tax thereon shall be calculated at the rates in force in the financial year;

c) where the calculation is made by the Assessing Officer for the purpose of making an amended order under sub-section (4) of section 210, the total income declared in the return furnished by the assessee for the later previous year, or, as the case may be, the total income in respect of which the regular assessment, referred to in that sub-section has been made, shall be taken and income-tax thereon shall be calculated at the rates in force in the financial year;

d) the income-tax calculated under clause (a) or clause (b) or clause (c) shall, in each case, be reduced by the amount of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so reduced shall be the advance tax payable.

Provided that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not, in each case, be reduced by the aforesaid amount of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax.

2. Where the Finance Act of the relevant year provides that, in the case of any class of assessees, net agricultural income (as defined in that Act) shall be taken into account for the purposes of computing advance tax, then, the net agricultural income to be taken into account in the case of any assessee falling in that class, shall be—

a) In cases where the Assessing Officer makes an order under sub-section (3) or sub-section (4) of section 210,—

i) if the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment forms the basis of computation of advance tax payable by him, the net agricultural income which has been taken into account for the purposes of charging income-tax for the assessment year relevant to that previous year; or

ii) if the total income declared by the assessee for the later previous year referred to in sub- section (4) of section 210 forms the basis of computation of advance tax, the net agricultural income as returned by the assessee in the return of income for the assessment year relevant to such later previous year;

b) in cases where the advance tax is paid by the assessee on the basis of his estimate of his current income under sub-section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, the net agricultural income, as estimated by him, of the period which would be the previous year for the immediately following assessment year.

3. Where the Finance Act of the relevant year specifies any separate rate or rates for the purposes of computing advance tax in the case of every Hindu undivided family which has at least one member whose total income of the previous year exceeds the maximum amount not chargeable to income-tax in his case, then, the Assessing Officer shall, for making an order under sub- section (3) or sub- section (4) of section 210 in the case of any such Hindu undivided family, compute (subject to the provisions of section 164) the advance tax at such rate or rates—

• • • in a case where the total income of the latest previous year in respect of which the Hindu undivided family has been assessed by way of regular assessment forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such latest previous year exceeds the maximum amount not chargeable to income-tax in his case;
    • in a case where the total income of the previous year in respect of which a return of income is furnished by the Hindu undivided family under section 139 or in response to a notice under sub- section (1) of section 142 forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such previous year exceeds the maximum amount not chargeable to income-tax in his case.

Analysis:

1. The Advance Tax shall be calculated on the current income at the rate applicable for the current year.

2. Where a person who has been already assessed by way of a regular assessment in respect of the total income of any previous year, the AO if he is of the opinion that such person is liable to pay advance tax, may serve an order under section 210(3).

3. In above case when the person who has been serve notice, the Tax shall be calculated by considering the income of the assessee on regular assessment or the income declared by the assesse in his Return of income whichever is higer.

4. The order can be served by the AO at any time during the financial year but not later than the last date of February.

5. In case after sending the above notice, but before 1st March of the F.Y., the assessee furnishes a ROI relating to any later previous year or an assessment is completed in respect of a later return of income, the AO may amend the order for payment of advance tax on the basis of the computation of the income so returned or assessed.

6. Calculation of Advance Tax shall be made after deducting the following:

1. TDS/TCS

2. For regular assessment, the tax already paid during the financial year.

7. The Advance Tax shall be calculated by considering the net agricultural income of the assesse.

8. For the purpose of calculation of advance tax of any HUF, where the AO has specified the any different tax rates and if the income of any member of such HUF is higher than the basic exemption limit then, tax shall be calculate at the rate at which such HUF has been assessed to tax.

4. Section 210: Payment of Advance Tax by the Assessee of His Own Accord or in Pursuance of Order of Assessing Officer

1. Every person who is liable to pay advance tax under section 208 (whether or not he has been previously assessed by way of regular assessment) shall, of his own accord, pay, on or before each of the due dates specified in section 211, the appropriate percentage, specified in that section, of the advance tax on his current income, calculated in the manner laid down in section 209.

2. A person who pays any instalment or instalments of advance tax under sub-section (1), may increase or reduce the amount of advance tax payable in the remaining instalment or instalments to accord with his estimate of his current income and the advance tax payable thereon, and make payment of the said amount in the remaining instalment or instalments accordingly.

3. In the case of a person who has been already assessed by way of regular assessment in respect of the total income of any previous year, the Assessing Officer, if he is of opinion that such person is liable to pay advance tax, may, at any time during the financial year but not later than the last day of February, by order in writing, require such person to pay advance tax calculated in the manner laid down in section 209, and issue to such person a notice of demand under section 156 specifying the instalment or instalments in which such tax is to be paid.

4. If, after the making of an order by the Assessing Officer under sub-section (3) and at any time before the 1st day of March, a return of income is furnished by the assessee under section 139 or in response to a notice under sub-section (1) of section 142, or a regular assessment of the assessee is made in respect of a previous year later than that referred to in sub-section (3), the Assessing Officer may make an amended order and issue to such assessee a notice of demand under section 156 requiring the assessee to pay, on or before the due date or each of the due dates specified in section 211 falling after the date of the amended order, the appropriate percentage, specified in section 211, of the advance tax computed on the basis of the total income declared in such return or in respect of which the regular assessment aforesaid has been made.

5. A person who is served with an order of the Assessing Officer under sub-section (3) or an amended order under sub-section (4) may, if in his estimation the advance tax payable on his current income would be less than the amount of the advance tax specified in such order or amended order, send an intimation in the prescribed form98 to the Assessing Officer to that effect and pay such advance tax as accords with his estimate, calculated in the manner laid down in section 209, at the appropriate percentage thereof specified in section 211, on or before the due date or each of the due dates specified in section 211 falling after the date of such intimation.

6. A person who is served with an order of the Assessing Officer under sub-section (3) or amended order under sub-section (4) shall, if in his estimation the advance tax payable on his current income would exceed the amount of advance tax specified in such order or amended order or intimated by him under sub-section (5), pay on or before the due date of the last instalment specified in section 211, the appropriate part or, as the case may be, the whole of such higher amount of advance tax as accords with his estimate, calculated in the manner laid down in section 209.

Analysis:

1. When the person lible to pay tax, the tax shall be calculated at appropriate percentage and computed in the manner as given in section 209.

2. The taxpayer may reduce/ increase the payment of advance tax according to his income for the remaining installments.

3. Where the person already been assessed on regular assessment and AO finds that the person is liable to pay advance tax, AO can serve the order to pay such advance tax but the order can be served by the AO at any time during the financial year but not later than the last date of February.

5. Section 211: Instalments of Advance Tax and Due Dates

1. Advance tax on the current income calculated in the manner laid down in section 209 shall be payable by—

a) all the assessees, other than the assessee referred to in clause (b), who are liable to pay the same, in four instalments during each financial year and the due date of each instalment and the amount of such instalment shall be as specified in the Table below:

TABLE

b) an assessee who declares profits and gains in accordance with the provisions of sub-section (1) of section 44AD or sub-section (1) of section 44ADA, as the case may be, to the extent of the whole amount of such advance tax during each financial year on or before the 15th March.

Provided that any amount paid by way of advance tax on or before the 31st day of March shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of this Act.

2. If the notice of demand issued under section 156 in pursuance of an order of the Assessing Officer under sub-section (3) or sub-section (4) of section 210 is served after any of the due dates specified in sub- section (1), the appropriate part or, as the case may be, the whole of the amount of the advance tax specified in such notice shall be payable on or before each of such of those dates as fall after the date of service of the notice of demand.

Analysis:

1. The advance tax shall be paid in above four installments.

2. In case the person has Opt to file the ROI under section 44AD, 44ADA i.e. presumptive basis, the whole tax shall be paid in only one installment i.e. on 15^th March of the previous year.

3. In case the person has paid some tax earlier, such tax shall be treated as advance tax and shall be allowed as deduction for the purpose of calculation of advance tax on 15^th March of the said financial year.

6. Section 214: Interest Payable by Government

1. The Central Government shall pay simple interest at fifteen per cent per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the assessed tax from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year, during which it is payable by reason of the provisions of section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment.

Provided that in respect of any amount refunded on a provisional assessment under section 141A, no interest shall be paid for any period after the date of such provisional assessment.

(1A) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub- section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the amount of the excess interest payable and requiring him to pay such amount ; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly.

2. On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made.

3. This section and sections 215, 216 and 217 shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment year and, in the application of the said sections to the assessment for any earlier assessment year, references therein [except in sub-section (1A) and sub-section (3) of section 215] to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.

Explanation 1 — In this section, “assessed tax” shall have the same meaning as in sub-section (5) of section 215.

Explanation 2 — Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section.

Analysis:

1. In case assessee has paid the advance tax in excess of his liability, then on such excess the government will pay the simple interest on such excess amount at 15% p.a. from 1^st day April of the A.Y. till the date of his regular assessment.

2. Where the amount has refunded on provisional basis, then no interest will be paid after the date of such provisional assessment.

3. Where on regular assessment or re-assessment or rectification, if interest was payable under sub- section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the AO shall serve the demand order for such interest and it will be treated as demand order under section 156.

4. Interest is paid only up-to the date of refund.

7. Section 215: Interest Payable by Assessee

1. Where, in any financial year, an assessee has paid advance tax under section 209A or section 212 on the basis of his own estimate (including revised estimate), and the advance tax so paid is less than seventy-five per cent of the assessed tax, simple interest at the rate of fifteen per cent per annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax.

Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the words “seventy-five per cent”, the words “eighty-three and one-third per cent” had been substituted.

Note: Since section 209A and 212 has been removed, there is no relevance of this sub-section.

2. Where before the date of completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,—

a) Interest shall be calculated in accordance with the foregoing provision up to the date on which the tax is so paid ; and

b) Thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax as so paid (in so far as it relates to income subject to advance tax) falls short of the assessed tax.

3. Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and—

a) in a case where the interest is increased, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;

b) In a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

4. In such cases and under such circumstances as may be prescribed, the Assessing Officer may reduce or waive the interest payable by the assessee under this section.

5. In this section and sections 217 and 273, “assessed tax” means the tax determined on the basis of the regular assessment (reduced by the amount of tax deductible in accordance with the provisions of sections 192 to 194, section 194A, section 194C, section 194D, section 195 and section 196A) so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made.

6. Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section and sections 216, 217 and 273.

Analysis:

1. Where the assesse has paid the tax under section 140A before completion of regular assessment the interest shall be calculated up-to the date on which tax is so paid.

2. Where on regular assessment or re-assessment or rectification, if interest was payable under sub- section (3) has been increased, the AO shall serve the demand order for such interest and it will be treated as demand order under section 156.

3. In a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

4. In the certain circumstances as may be prescribed the AO may waive of the interest liability.

8. Section 216: Interest Payable by Assessee in Case of Under-Estimate, Etc.

Where, on making the regular assessment, the Assessing Officer finds that any assessee has—

a) under section 209A or section 212 under-estimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments; or

b) under section 213 wrongly deferred the payment of advance tax on a part of his income; he may direct that the assessee shall pay simple interest at fifteen per cent per annum—

1. 1. 1. In the case referred to in clause (a), for the period during which the payment was deficient, on the difference between the amount paid in each such instalment and the amount which should have been paid, having regard to the aggregate advance tax actually paid during the year; and
      2. In the case referred to in clause (b), for the period during which the payment of advance tax was so deferred.

Explanation.—For the purposes of this section, any instalment due before the expiry of six months from the commencement of the previous year in respect of which it is to be paid shall be deemed to have become due fifteen days after the expiry of the said six months.

Analysis:

In case an assessee has under estimated the tax and paid less tax in first two installment or wrongly deferred the payment of advance tax, he shall be liable to pay the simple interest at fifteen per cent per annum on such short payment or deferment.

9. Section 218: When Assessee Deemed to be in Default

If any assessee does not pay on the date specified in sub-section (1) of section 211, any instalment of the advance tax that he is required to pay by an order of the Assessing Officer under sub-section (3) or sub-section (4) of section 210 and does not, on or before the date on which any such instalment as is not paid becomes due, send to the Assessing Officer an intimation under sub-section (5) of section 210 or does not pay on the basis of his estimate of his current income the advance tax payable by him under sub- section (6) of section 210, he shall be deemed to be an assessee in default in respect of such instalment or instalments.

Analysis:

Where an assessee has not paid the advance tax on due date of payment of any installment as prescribed under section 211(1) or on the order made under section 210(4), the assessee shall be deemed to be treated as assessee in default.

10. Section 219: Credit for Advance Tax

Any sum, other than a penalty or interest, paid by or recovered from an assessee as advance tax in pursuance of this Chapter shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit therefor shall be given to the assessee in the regular assessment.

Analysis:

In case an assessee has paid the any sum other than penalty and interest or any sum recovered from the assessee, the credit shall be given for the said amount for the period for which it would relates.

Conclusion: In conclusion, Sections 207 to 219 of the Income Tax Act, 1961, outline essential provisions related to Advance Tax. Comprehending these sections is vital for taxpayers to meet their obligations and understand the intricacies of advance tax computation, payment, and associated interest implications. This article aims to provide a comprehensive guide to assist individuals and businesses in navigating these provisions effectively.