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Pay as you earn - Advance Tax



Chartered Accountant

Pay as you earn - Advance Tax
Query 1]
After having calculated the expected income for the financial year 2015-2016 (Assessment Year 2016-2017), there was a need of payment of Rs. 30,000/- as Advance Tax. The said amount was deposited in the bank using Challan No-ITNS 280 in 3 installments of Rs. 10,000/-. The dates of payments are (i) 09/09/2015 (ii) 08/12/2015 and (iii) 08/03/2016. Later on, the final calculations of income tax revealed that there was a shortage of about Rs. 3,000/- in Advance Tax amount. Taking this into account, another payment was made on 15/7/2016 as ‘Self Assessment Tax’. The amount paid was Rs. 3,500/-. The margin of Rs. 500/- was given for interest payment u/s 234 (A,B,C).
However in Form 26 AS, 2 entries of Advance Tax (Dt. 9/9/2015 & 8/12/2015) and one entry of Self- Assessment Tax (Dt. 15/7/2016) were shown. The entry of 3rd installment paid on 8/3/2016 is missing. After going through the CIN- Receipts issued by the bank, it was noted that the PAN number is wrongly punched in the case of 3rd installment. You are requested to advise suitably. [Mr. V.D.Bade -]
Advance tax is “pay-as-you-earn” concept of levying taxation.
Tax is the biggest source of revenue for majority of the country in the world. India is not an exception. Though income tax return is required to be filed annually, for speedy and evenly collection of tax, a mechanism in the form “Advance Tax” is deployed by the Government.
Advance tax is a payment mechanism in which tax is deposited by taxpayer in installment instead of entire amount being deposited at the time of filing income tax return. In short, paying advance tax means paying annual income tax liability in regular installments, instead of lump sum amount at the year end. Income tax rules make it mandatory to pay advance tax if the income tax liability is Rs 10,000 or more. Advance tax applies to all tax payers, salaried, freelancers, and businessmen. Apart from Government, it is also beneficial from the perspective of taxpayers as the tax liability is divided in installments.
If advance tax is not paid or the amount of advance tax paid is less than 90% of the assessed tax, taxpayer shall be liable to pay simple interest
a] @ 1% p.m. u/s 234B from 1st day of assessment year up to date of deposit tax & interest
b] @ 1% p.m. u/s 234C if the payment of advance tax is deferred beyond the due dates, for a period of 3 months, will be payable for every deferment, except for the last installment of 15th March where it will be 1% for one month only.
Advance tax is required to be paid before a particular date as a percentage of the total tax (after reducing TDS/TCS) that is expected to be payable for the full financial year. Therefore, in order to pay advance tax by a given date, an individual tax payer need to estimate his expected income for the full year, calculate the tax (after reducing TDS/TCS) that would be payable on this estimated income and then pay advance tax so that the specified percentage of the total tax payable is paid. These payments have to be made in installments as per due dates provided by the income tax department.
From the AY 2017-18, individuals/HUF would also be required to pay Advance Tax in 4 installments as against 3 installments earlier. The revised due date for payments of advance tax for the current year as amended by the Finance Act-2016 are as under:
  1. For All taxpayer (other than covered under section 44AD of the I.T. Act 1961)
Due Date Installment Payable
 On or before 15th June, 2016  Not less than 15% of advance tax.
 On or before 15th  Sept, 2016 Not less than 45% of advance tax as reduced by the amount paid in the earlier installment.
 On or before 15Th Dec, 2016 Not less than 75% of advance tax as reduced by the amount paid in the earlier installments.
 On or before 15Th Mar, 2017  The whole amount (100%) of advance tax as reduced by the amount paid in the earlier installments.
  1. Advance Tax Liability for taxpayer covered by presumptive taxation under section 44AD of the I.T. Act 1961:
Due Date Installment Payable
On or before 15th June, 2016
On or before 15th  Sept, 2016
On or before 15Th Dec, 2016
On or before 15Th Mar, 2017 The whole amount (100%) of advance tax as reduced by the amount paid in the earlier installments.
Further, taxpayer should carefully note the following:
  1. Even if there is a delay of a single day in the installment payment in any quarter (except last month advance tax installment due on 15th March), interest would be levied @ 1% for full 3 months. It means that 3% interest would be payable for even a single day delay. Be careful; make the payment of advance tax reasonably before time so as to avoid the rigor of interest.
  2. Net agriculture income is also to be taken into account for computing advance tax.
  3. Taxpayers covered by presumptive taxation section 44AD would now be required to pay advance tax of the whole amount in one installment on or before the 15th March of the financial year as a result of raising the turnover limit from Rs.1 crore to Rs. 2 crore.
  4. Resident individuals who are over 60 years of age (senior citizen) and don’t have income chargeable under the head ‘Profits and Gains of Business or Profession’ are not required to pay advance tax.
  5. Any amount paid by way of advance tax on or before 31st March shall also be treated as advance tax paid during financial year ending on that day
  6. Deduction under Chapter VI-A are allowable while computing liability of advance tax.
  7. TDS is to be reduced from total tax liability of assessee and then specified percentage be calculated of advance tax.
  8. A concession is provided recently by the Finance Act-2016 as a result of which if an individual even pays 12% and 36% of the total tax payable for the full fiscal by June, 15th & Sept, 15th, instead of the full 15% and 45% then he would not be liable to pay interest of 1% on the shortfall in advance tax.
In the present case,
As the PAN is wrongly recorded while making the payment, the same would not get reflected in the 26AS of the taxpayer. You are advised to make a written request to your Assessing Officer along with documentary evidences to enable him to transfer the said amount in your PAN. After necessary correction by the department, amount would be reflected in your 26AS and you would be able to avail the credit for the same. Further, it appears that you have paid 90% of your total tax liability and as a result there will not be any liability towards interest u/s 234C. Income tax department is very transparent in its working & excess of Rs. 500/- excess paid by you as interest would be refunded to you after you file your income tax return. Ensure the correction in the last installment of advance tax of Rs. 10,000/- for the refund.
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
or email it at]

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