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Advance Payment of Tax 24
Advance Payment of Tax 24
STUDY NOTE - 24
INTRODUCTION
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. At present all items of income
including capital gains, winnings from lotteries, etc. are liable for payment of advance tax.
Section 208 now makes it obligatory to pay advance tax in every case where the advance tax
payable is Rs. 5,000 or more.
Assessee is required to pay advance tax on their income which they expect to earn during
current Financial Year. Thus, for Financial Year 2008-09 (relevant to assessment year 2009-10)
advance tax is payable in installments during the Financial Year 2008-09, itself. The advance
tax so paid is adjusted against the total tax assessed for the assessment year 2009-10.
Payment of advance tax in case of capital gains/casual income [Proviso to section 234C]
(1) Advance tax is payable by an assessee on his/its total income, which includes
capital gains and casual income like income from lotteries, crossword puzzles etc.
(2) Since it is not possible for the assessee to estimate his capital gains, income from
lotteries, etc., it has been provided that if any such income arises after the due date
for any installment, then, the entire amount of tax payable (after considering tax
deducted at source) on such capital gains or casual income should be paid in the
remaining installments of advance tax which are due.
(3) Where no such installment is due, the entire tax should be paid by 31st March of
the relevant financial year.
(4) No interest liability under section 234C would arise if the entire tax liability is so
paid.
Credit for advance tax [Section 219]
Any sum, other than interest or penalty, paid by or recovered from an assessee as advance tax,
is treated as a payment of tax in respect of the income of the previous year and credit thereof is
given in the regular assessment.
Interest for default in payment of Advance Tax [Sec 234B, 234C]
Please refer Chapter ‘Interest’ on page no. 3 and 4
In case of section 115J cases - Interest is not leviable under sections 234B and 234C in the case of
assessment of a company on the basis of book profits under section 115J - CIT v. Kwality Biscuits
Ltd. 155 Taxman 658 (SC).
[Note: Now, although Section 115JA if not operative, similar provisions are made in Section
115JB, which are operative. CBDT has issued a circular that All companies are liable to pay
advance tax considering wording section 115JB. Therefore, interest under sections 234B and
234C is applicable for defaults in payment of advance tax - Circular : No. 13/2001, dated 9-11-
2001. The amendment of section 115JB(1) enabling Assessing Officer to levy interest under
sections 234B and 234C is constitutional - Jindal Thermal Power Co. Ltd. v. Dy. CIT 154 Taxman
547 (Kar.)].