If you have not paid your advance tax, then you need to hurry up as 15th March is the last date for paying your fourth and the final instalment of advance tax to the government.
By now you must have read and heard that “15th March 2018 is the due date for the payment of Advance Tax for the financial year 2017-18, please deposit it soon” across the media. However, do you really know the what, why and when of Advance Tax? If no, then we are discussing all the provisions related to the advance tax as well as the consequences of nonpayment of it.
What is Advance Tax
Advance Tax is a tax which you pay in the same year in which you earn the income and that is why it is also named as “Pay as You Earn” tax. It is to be paid in installments during the year by all the individuals and corporate taxpayers. However, individuals who have opted for the presumptive scheme of taxation have to make the payment in a single installment.
When the liability to pay advance tax arises?
As per the Income Tax Act, 1961, all taxpayers whose estimated tax liability after TDS is Rs 10,000 or more are required to pay advance tax. Therefore, a salaried person is not required to pay it on his salary income as tax is already deducted by his employer. But in case of other incomes, he has to ascertain his tax liability and accordingly consider the advance tax provisions.
However, if you are a resident senior citizen (over 60 years) and not having any income from business or profession head, then in that case the liability to pay advance tax does not arise.
Timings of payment of Advance Tax
As per the Income Tax law, the due dates for paying the different installments over the year have been specified. The due dates for Individual and corporate taxpayers for FY 2017-2018 are:
Advance Tax Payable
On or before 15th June
Up to 15% of advance tax
On or before 15th September
Up to 45% of advance tax
On or before 15th December
Up to 75% of advance tax
On or before 15th March
Up to 100% of advance tax
Please note: If you have opted for the presumptive taxation, then instead of four installments, the whole of tax is to be paid at once (100%) on or before 15th March.
At this moment, the question which must be coming to your mind is how to calculate the advance tax liability?
Just follow the below simple steps as under and what you get is your advance tax liability:
1. Estimate your total income earned from 1 April- 31st March.
2. Subtract the tax-deductible expenses/ eligible investments from the above income.
3. Compute tax on resultant Income and reduce the amount of tax paid by way of TDS/TCS.
Let’s also discuss that what if we forgot to pay Advance Tax, i.e. consequences of non payment:
The advance tax paid gets adjusted against the total tax liability. If advance tax is not paid correctly or not on time, then interest will be levied under sections 234 B and 234 C as the case may be. If the total advance tax paid is less than the total tax liability, then the balance amount of tax is to be paid along with interest at the time of filing of return as per the provisions of the law.
Pay your 100% dues correctly on or before 15th March every year so that you are not required to pay any more tax at the time of filing of the return.
(By CA Abhishek Soni, Founder, tax2win.in)