CA Pratik Anand

This is an attempt to help the professionals especially the newly qualified, accountants and the general public in making an estimate of advance taxliability and its payment.

Advance Tax Provisions under the Income Tax Act’1961

1)      Advance Tax is applicable for all assessees whose Tax Liability exceeds Rs. 10,000/- during the financial year.

2)      Advance Tax is payable as follows:

Particulars For Companies For other than Companies
Up to 15th June of financial year 15% of Tax Payable N.A.
Up to 15th September of financial year 45% of Tax Payable 30% of Tax Payable
Upto 15th December of financial year 75% of Tax Payable 60% of Tax Payable
Upto 15th March of financial year 100% of Tax Payable 100% of Tax Payable

 Points to remember:-

ü  Advance Tax provisions are not applicable in case of assessees having income under head PGBP U/s 44AD and 44AE i.e presumptive income.

ü  Advance Tax provisions are not applicable in case of senior citizens aged above 60 years, but if senior citizens have business income then Advance Tax provisions are applicable.

ü  Note above points are applicable for residents only i.e exemptions are available only for residents. No exemption for senior citizens if such individual is Non-resident.

ü  Advance Tax can be paid by challan ITNS 280 under the minor head code 100 and Major Head code is 0020 for tax on Companies and 0021 for Tax on other than Companies.

ü  Tax can be paid by challan either by cheque, cash or by the online mode.

Advance Tax calculation-Individuals

Advance calculation for individuals is like filing the return of income, therefore involves similar steps.

Steps Involved

Step-1 First of all the form 26AS of the individual is to be taken into account for calculating income. Take all incomes into consideration shown in the form 26AS on which TDS is deducted or not. Such income may not be of the whole year while calculating advance tax, therefore has to be projected for the whole year while calculating Advance Tax. Remember to also take TDS for the whole year.

 Step-2 Now see if there is any other income of the assessee during the year by talking to the individual or by examining his bank statements. Also, take into account previous years incomes while considering incomes of this year (some incomes accrue every year therefore, have to be taken into account every time).The incomes in step-2 are those on which TDS is not deducted, therefore not shown in 26AS.

Step-3 See the investments of the assessee to project the deductions under chapter VI-A like 80C, 80G etc.

Step-4 Once this is done and the total income is projected, then apply tax rates as applicable in the financial year for which tax is deducted and project the advance tax.

                     ADVANCE TAX CALCULATION

For firms, companies  and other business entities

A. For a company whose accounts are reliable and up to date as on date of calculation

Step-1- Just see the P&L upto the previous month or previous day (from date of calculation),if the accounting is complete/up to date. For Ex: Accounts upto 28th feb’2014 can be seen for calculation Advance Tax for March’14.

Step-2 See if all entries are taken upto that month/date i.e whether the accounting is complete. If not then take entries into account which are not yet entered.

Step-3 On the basis of figures till last month or previous day (based on the date of calculation), project the figures for the current month so that P&L A/c for upto the period required for calculation is made.

Some items can be taken on actual or close to actual figures while projecting the figures for the month like:

a)      Electricity

b)      Water

c)      Salaries and other employee based expenses

d)     Telephone

e)      Other Recurring Expenses which occur every month.

f)       Depreciation should be calculated on actual basis based on the rates applicable.

Other items of expenses can be projected on a percentage basis seeing total percentage of indirect and direct expenses as in the last year.

Sales and purchases can be forecasted based on the average of the monthly figures of previous months and also look at the previous year average for the final forecast.Purchase percentage generally should remain within a range on a year on year basis.

Step-4 Now since the P&L is made, have a look at the gross profit & Net profit figures. The G.P & N.P ratios cannot be less than last year unless there is major change in turnover compared to last year. Based on this principle,arrive at a Net profit figure on which Advance Tax should be calculated (G.P & N.P Ratio may be increased a bit for current projection).

Step-4 Once advance Tax is calculated, you could pay 90% of the amount due. The 90% principle saves money (10%) and also interest. u/s 234B is saved. Only 234Cinterest is to be paid which is less than the amount earned by saving 10% of the amount.

B. For Companies/Firms etc. whose accounts are not upto date or reliable as on date of calculation 

Step-1 Forecast the sales figures of the current year based on the data available till date.

Step-2  Based on the sales figures, arrive at Gross profit and net profit amounts by taking the Gross and net profit ratio (%)of the previous years. Last year’s ratios should be increased slightly.

Step-3 Based on the net profit arrived at, Calculate the amount of tax. 

Points to Remember

1) Do not forget to take into account necessary expenses like depreciation, remuneration in case of firms(Remuneration should only be on Income under the head PGBP).

2) Incomes taxable under other heads of income should be separated i.e. deductedand not taken while calculating net profit under the head PGBP.Incomes taxable under other heads should be taken separately and tax should be calculated separately on these incomes. Example: Income under the head capital gains.

3) Expenses which are to be disallowed are to be added back while calculating net profit. Eg: Expenses disallowed on account of personal use.

4) Any income or expense which have not occurred yet but is expected to be done based on previous experience should be taken into accountwhile calculating profit and consequently tax figures.

5) In case of Companies, remember to be add back depreciation as per books(i.e.as per Companies Act) and deduct Depreciation as per the Income Tax Act.

6) Keep an eye on the surcharge applicable where total income exceeds Rs. 1 crore. In that case extra 10% is to be added on basic amount of tax without Cess.

Hope you find the above information relevant and useful in your daily practise.

(The author is a CA in practice at Delhi and can be contacted at: E-mail: capratikanand@gmail.com, Mobile: +91-9953199493)

Author Bio

Qualification: CA in Practice
Company: Pratik & Associates
Location: New Delhi, New Delhi, IN
Member Since: 10 Jun 2017 | Total Posts: 52
Pratik Anand is the founder of youronlinefilings.com, an online startup for business registrations, annual business compliance services, Tax filings, book keeping, legal consultancy etc. He is a Chartered accountant by profession and has special flair and expertise in the area of direct Taxation. H View Full Profile

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10 responses to “Practical Guide to Advance Tax Calculation & payment”

  1. Shbham says:

    I have earned capital gain of 10 lac on 30/04/2016 and I have a business which is eligible for 44AD and the all taxes due are paid by me on 14/03/2017,
    I want to know that interest under section 234 B and C will be levied on me or not

  2. ATULKUMAR says:

    i have income from salary is 32500
    income from interest received 300000
    my LIC IS appx 30000 per year
    what is figture for advance tax for march

    atul

  3. Mahendrasingh says:

    i want to know about how to finalisation of company and pay advance tax

  4. ujjwal says:

    Daar Sir ,

    Very clear & Practical Notes for Advance Tax
    Thanks

  5. Balakrishna Gurrapu says:

    Pls Clarify,
    Our registered PVT LTD Concern.
    we have NIL Profit, but expected to earn profit of Rs.1.00 Crore from Jan to Mar-201y,
    here we liable for Advance Tax?
    Whether we have to penalty on non payment advance tax for earlier payment?

    Pls send your reply balagurrapu@gmail.com

  6. Nilesh Gandhi says:

    Dear Sir,

    I want to ask a question that, whether capital gain tax is considered for calculation of Advance tax ie.30% or 60% at the time of payment ?
    Please give reply as early as possible with detailed explaination as refered to above question.

  7. Pratik Anand says:

    Dear Mr. Bhupal Singh ji,

    Advance tax provisions are not applicable to senior citizens not having business income. You can refer the relevant provisions of the income tax act 1961 for this.
    In your case you would not have to pay interest on shortfall in tax deduction and payment’. You will have to pay interest only if you file your return late but that would be interest for late filing rather than for not paying advance tax.Interests under sections 234B and 234C are not applicable in this case.

    • Bhupal Singh says:

      Dear Sir,

      I appreciate the clarification given by you. Please accept my thanks for the same.

      With best reards,

      Bhupal Singh

  8. ASHWIN GALA says:

    Many cases are now covered u/s 44AD.

    Now if Tax payable for Income u/s 44AD is , say Rs. 40,000/- And
    (1) there is Income from other source also say Rs. 1000/- Or
    (2) There is income from other source also Rs. 100000/- & deductions U/s sec. 80 C Rs. 100000/- OR
    (3) Income from other sourec also Rs. 400000/- & deduction Rs. 100000/-

    HOW TO CALCULATE ADVANCE TAX IN ALL ABOVE THREE CASES ?

  9. Bhupal Singh says:

    Dear Sir,

    You have stated in your article that Advance Tax is not applicable to Senior Citizens, if they are above 60 yrs age. My question is —

    Suppose the gross I.Tax works out at the time of filing IT Return
    to be Rs. 65000/- and the TDS on FDs etc is Rs 35000/-, will the
    Assessee have to pay interest on the shortfall of Rs.30,000/- Tax
    which he will deposit as Self Assessment Tax at the time of filing
    Income Tax Return in June due to delayed payment of I.Tax, even if
    he is a Senior Citizen of above 60 yrs age ?????? Can you quote the
    Authy for exemption from depositing Adv Tax for such Senior
    Citizens??? Also if No interest is payable by such Assessees for
    late depositing of Self Assessment I.Tax at the time of , please
    quote authy ???

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