As per the provisions outlined in sections 208 to 219, taxpayers are required to pay advance tax for the financial year 2023-24 in four instalments. The third instalment, due before 15th December 2023, is a crucial deadline for individuals and businesses. This article delves into the intricacies of advance tax payment, its calculations, and the consequences of non-compliance.

On the income of the financial year 2023-24, tax is to be paid during the same financial year, in four instalments as under:

Installment Due Date
1st Before 15th June, 2023
2nd Before 15th September, 2023
3rd Before 15th December, 2023
4th Before 15th March, 2024

Provision of Payment of Advance tax shall not apply to an individual resident in India; who-

(a) does not have any income chargeable under the head ’Profits and gains of business or profession”; and

(b) is of the age of sixty years or more at any time during the previous year.

Advance tax shall be payable in each instalment during financial year 31.03.2017 and subsequent years is indicated in the following manner.

Due date of instalment   Amount payable
01. On or before 15th June Not less than 15% of such Advance tax
On or before 15th September Not less than 45% of such Advance tax, as reduced by the Amount, if any, paid in the Earlier instalment.
On or before 15th December Not less than 75% of such Advance tax, as reduced by the Amount or amounts, if any paid In the earlier instalment or Instalments.
On or before 15th March The whole amount of such advance tax as reduced by the Amount or amounts, if any,
paid In the earlier instalment or Installments.

The amount of instalment is to be calculated after giving credit of Tax deducted at source.

Following example will make it easy to understand the calculation of amount of advance tax, in each instalment.

Mr. Shah, estimates his income for the financial year 2023-24, ie. Current year from various sources as under:

Business Income Rs. 5,95,000
Income from house property Rs. 23,000
Interest on deposit ( TDS Rs.1,200) Rs. 12,000
Dividend income (TDS Rs. 4,000) Rs. 40,000
Other income (TDS Rs. 3,000) Rs. 30,000
Gross Total income Rs. 7,00,000
Less Deduction under chapter VIA Rs. 50,000
Taxable income Rs. 6,50,000

Tax payable on above income including Income tax and additional Surcharge on

Current income of Rs. 6,50,000 Rs. 44,200
LESS: Tax deducted at source
On interest Rs. 1,200
On dividend Rs. 4,000
On other income Rs. 3,000 Rs. 8,200
Liability Of Advance tax Rs. 36,000

Calculation of advance tax payable in each installment will be as under:

Due date of installment Amount of installment payable
On or before 15.06.23 Rs. 5,400(being 15% of 36000)
On or before 15.09.23 Rs.10,800 (being 45% of 36000 16,200-5400)
On or before 15.12.23 Rs.10,800 (being 75% of 36000 27,000-16200)
On or before 15.03.24 Rs. 9,000 (being 36000-27000
Total amount of adv. Tax Rs. 36,000

Suppose if under any instalment tax has been paid less, in next instalment it is to be paid with interest @12% on remaining amount under section 234B of the Act.

Section 234B: Interest chargeable for defaults in payment of advance tax:

Where the assesse fails to pay advance tax which he is liable to pay u/s 208 or, where the advance tax is less than 90% of the assessed tax, he shall be liable to pay simple interest at the rate of 1% for every month or part of a month comprised to the period from 1st April next following the financial year in which the advance tax was payable to the date of determination of total income u/s 143(1) and where a regular assessment is made.

For the purpose of interest under section 234B, “assessed tax” means the tax on the total income determined u/s 143(1) or on regular assessment as reduced by the amount of,-

1. amount of TDS;

2. any relief of tax allowed u/s 89;

3. any relief of tax allowed u/s 90 on account of tax paid in A country out side India;

4. any relief of tax allowed u/s 90A on account of tax paid, Outside India ;

5. any deduction from Indian Income tax payable, allowed u/s 91, on account of tax paid in a country out side India; and

6. any tax credit allowed to be setoff.

Conclusion:

The upcoming deadline of 15th December 2023 for the 3rd instalment of advance tax is a critical milestone for taxpayers. Understanding the calculations and ensuring timely payments is not only a legal obligation but also essential for avoiding interest charges.

Failure to comply with advance tax payment obligations may result in interest charges under section 234B. It is imperative for taxpayers to carefully assess their income, follow the prescribed timelines, and meet their advance tax liabilities to maintain financial prudence and regulatory compliance.

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