Tax Concept – Did you know basics of Advance Tax?

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Today we will discuss on basics of Advance tax concept under direct tax.

Advance tax means income tax should be paid in advance instead of lump sum payment at year end. It is also known as pay as you earn tax. These payments have to be made in instalments as per due dates provided by the income tax department.

Payment of tax liability by a person before the end of the financial year is called advance tax

3 cases normally Exempt from provision of Advance tax. 

  1. Resident senior citizens (age 60 years or more) not having income from PGBP. 

     

  2. Assessees whose advance tax liability is less than INR 10,000 for the relevant previous year.

  3. Assessees whose entire amount of tax payable has been deducted through TDS.

Normally, employees are not required to pay advance tax since the employer deducts the amount of TDS of employees every month and deposit the same with government. However, in case employee is earning other sources of incomes which have not been disclosed to the employer for TDS purpose, in such case employee shall calculate the liability of advance tax and pay such tax accordingly.

Dates and Installments of Advance tax:

Other than Section 44AD or Section 44ADA assessee:

The assessee is required to pay the advance tax in four installments

Installment No. 1: 15% of total tax payable : 15th June

Installment No. 2: 45% of total tax payable : 15th September 

Installment No. 3: 75% of total tax payable 15th December. 

Installment No. 4: 100% of total tax payable: 15th March

Note: 

1) Installments are cumulative and amount already paid till installment date is required to be deducted from computed amount as per percentage. 

2)The law provides the accumulated %age due to restating the estimations of advance tax so that most recent estimation shall be applicable).

Section 44AD and Section 44ADA assessee:

100% of the advance tax on 15th March in one installment only.

Note:

  1. The Installments are applicable for all type of assessees.

  2. Section 44AD (8% or 6%) is applicable to individual, HUF and a firm other than LLP who are RESIDENT of India only doing business.

  3. Section 44ADA (50%) is a presumptive taxation scheme for professionals which have been introduced by Finance Act, 2016

CA Jayprakash Pandey

The author, CA Jayprakash Pandey is a practicing Chartered Accountant (Founder of Jayprakash P & Company) having Office at Mumbai, with more than 5 years of professional cum practical experience, Direct Tax, International Taxation, Indirect Tax & FEMA related advisory, litigation & compliance matters.

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