ADVANCE PAYMENT OF TAX

INTRODUCTION The term advance tax means total tax on the estimated income for current Financial Year less TDS, which is required/ expected to be deducted at source, during the previous year, if any. Although the income of previous year of the assessee is taxable in the immediately following assessment year, the assessee has to pay advance tax during the Financial Year proceeding the assessment year on the basis of his own computation of income. Income including capital gains, winnings from lotteries, etc. are liable for payment of advance tax. Advance tax is payable in instalments. The advance tax so paid is adjusted against the total tax assessed for the assessment year.

WHEN A PERSON BECOMES LIABLE TO PAY ADVANCE TAX

All Persons including salaried employees with advance tax payable Rs 10,000 or more. An assessee opted for computing business income u/s 44AD on presumption at the rate 8% of turnover is exempted from payement of advance tax.

Dates for payment of advance tax

For corporate assessee
By 15th June of previous year 15% of advance tax

For non corporate assessee

By 15th September of previous year

By 15th December of previous year By 15th March of previous year

45% of advance tax less advance tax paid earlier

75% of advance tax less advance tax paid earlier 100% of advance tax less advance tax paid earlier

30% of advance tax

60% of advance tax less advance tax paid earlier 100% of advance tax less advance tax paid earlier

COMPUTATION OF ADVANCE TAX

Step I Estimate the current income of the financial year for which the advance tax is payable. Step II- Compute tax on such estimated current income at the rate(s) of tax given under Part III of the First Schedule of the relevant Finance Act. Step III- From tax so computed, deduct the rebate, if any , likely to be allowed u/s 88E. Step IV- On the net tax , if any , computed at step III, add surcharge as applicable. Step V Add education cess to the amount computed at step IV Step VI- Allow relief, if any , u/s 89. StepVII- Deduct the tax deductible or collectable at source during the financial year from any income which has been taken into account in computing the current income. Step VIII- The balance amount is the advance tax payable provided it is Rs. 10000 or more.