Chapter 12 Advance Payment of Tax [Sections 207-211, 217 & 219, be charged to tax in the assessment year 2023-24, But the assessee ie Fequired to pay = on the taxable income of financial year 2022-23 during the financial year 2022-23 sitizen not required to pay advance tax [Section 2072) ons of advance tax shall not apply to an individual resident ‘in India, who— ane nyjincome chargeable under the head “Profits and gains of business or jon”sand (+ ‘the age of 60 years or more at any time during the previous year. as of Liability to pay Advance Tax [Section 208] cecak, tS computed in accordance with the provisions of this Chapter, shall be payable ial year, only when the amount of such advance tax payable by the assessee during that 000 or more. tation and Payment of Advance Tax where the calculation is made by the assessee tion 209(1)(a) & (d)] rent pativance tax payable by an assessee in the financial year on his own accord on the ‘current income shall be computed as follows: # — Estimate the curent income ofthe financial year for which the advance tax is Payable, Pampute tax on such estimated curent income atthe rate(s) of tax given under Part III of the First Schedule of the relevant Finance Act or special rates given in the Income Tax Act. On the tax computed at Step I add surcharge if applicable. ‘Add health and education cess to the amount computed under step TIL. Allow relief, if any, under section 89, 90, 90A & 91.Corporate Tax Planning & Management Chap. Step VI — Deduct credit, if allowable, under section 11SJAA (MAT credit) or 115 (AMT credit) of the tax paid in earlier years, Step VII — Deduct the tax deductible or collectable at source during the financial year any income (as computed before allowing deduction admissible under the which has been taken into account in computing the current income [: 209(1)(4)), Step VII — The balance amount is the advance tax payable provided it is 210,000 or However, it will be payable in certain instalments as mentioned in para 12 1, Estimated current income means estimate of ineome likely to be earned during the Previous year under five heads of income. Thereafter, set off brought forward losses. ‘such estimated gross total income deductions likely to be claimed under sections 80C to will be deducted, This section makes the provision for advance tax applicable to all classes of income provides that the advance tax shall be reduced by the amount of tax deductible at However, if the person responsible for deducting tax has paid or credited such income wit deduction of tax, then tax deductible at source shall not be reduced ,while computing advance tax liability. ; For purpose of calculating advance tax, estimated agricultural income of the relevant -yeat shall also be included for rate purposes. 12.5 What constitutes Current Income? Current income will include all items of income, It includes capital gains (both long-term short-term), winnings from lotteries, crossword puzzles, etc. For computation of advance tax oe current non-agricultural income, even agricultural income will be included for rate purposes, whe as per provisions of the Income-tax Act, it is required to be so included, 12.6 Payment of advance tax (A) _ By the assessee on his own accord under section 210(1): Every person who is liable advance tax under section 208 (whether or not he has been previously assessed by regular assessment) shall, of his own accord, pay, on or before each of the due dates s in section 211, the appropriate percentage, specified in that section, of the advance tax current income, calculated in the manner laid down in section 209. (See para 12.4]. Increase or decrease of subsequent instalments (Section 210(2)|: A person who pays! instalment or instalments of advance tax under section 210(1), may increase or reduce amount of advance tax payable in the remaining instalment or instalments to accord w estimate of his current income and the advance tax payable thereon, and make payment said amount in the remaining instalment or instalments accordingly. Payment of advance tax in pursuance of an order/amended order of Assessing under sections 210(3) & 210(4): Although it is mandatory for the assessee to calculate ay advance tax, the Assessing Officer may pass an order under section 210(3) or a order under section 210(4) and issue a notice of demand under section 156 requiring! assessee to pay advance tax. Such order can be passed by Assessing Officer on the as only when the following conditions are satisfied: (The assessee has already been assessed by way of a regular assessment in respect Total Income of any previous year; (ii) Such notice can be issued whether the assessee has paid any instalment of advance: not; (ii) The Assessing Officer is of the opinion that such person is liable to pay advanceSekap. 12 Advance Payment of Tax 295 (#) Such order can be passed at any time during the financial year, but not later than the last day of February. (») Such order must be made in writing. (vi) The notice of demand should specify the amount of advance tax and the instalment or instalments in which such advance tax is to be paid. Computation of tax by Assessing Officer (Section 209(1)(b) read with section 209(2)(a)]: The sssing Officer, for determining the advance tax payable by the assessee, shall take the current Benne of the assessee to be the higher of the following two: ja) The Total Income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment (it will also include agricultural income of such Previous year which has been taken into account for rate purposes); or {) The Total Income retuned by the assessee for any previous year subsequent to the previous year for which regular assessment has been made (it will also include agricultural income of Such previous year which has been taken into aecount for rate purposes), ‘Tax on above current income at the rate in force during the financial year will be caleulated by the | sing Officer. From such tax calculated, the amount of income-tax which would be deductible or Bectable at source and actually deducted during the said financial year shall be reduced and the $Peunt of income-tax as so reduced shall be the advance tax payable, Amendment of Order for payment of Advance Tax (Section 210(4): If, after making the above = by the Assessing Officer, but before Ist March, (a) a return of income is furnished by the Ses s<¢ under section 139 or in response to a notice under section 142(1), or (6) a regular assessment EE: sssessce is made, in respect of a Jater previous year, for any higher figure, then the Assessing fet may amend his order and issue to such assessce a notice of demand under section 156 on the PSs of income declared in such return or income so assessed (such income shall also include SScultural income which has been taken into account for rate purposes). On receipt of the revised i, the assessee will have to pay advance tax accordingly. Such sum shall be payable at the SSeropriate percentages on or before the due dates specified in section 211 falling after the date of Seended order. Assessee can submit his own estimate if its current income is likely 10 be lower |Section 2105) $5 Rule 391: On receipt of the order/amended order to pay advance tax from the Assessing Office Pe assessee, if in his estimation, the advance tax payable on his current income would be less than the mount of the advance tax specified in such order/amended order, can submit his own estimate of Srcr current income and pay advance tax on the basis of his estimation at appropriate percentages on Brbefore the due dates specified in section 211 falling after the date of order/amended order. In such a SS the assessee will have to send an intimation in Form No. 28A to the Assessing Officer on or Pefore the due date of last instalment specified in section 211 Assessee fo pay advance tax on his own estimate if its current income is likely 10 be higher Section 210(6)]: Ifthe assessee estimates that current income is likely to be higher than the amount Ssimated by the Assessing Officer in the order/amended order or in the intimation sent by him under Estion 210(5), the assessee shall pay whole of such higher tax according to his own estimate on or Before the due date of each instalment specified in section 211. In this case, there is no need to send an timation on Form No. 28A to the Assessing Officer. 1 Where the assessee has paid the advance tax as per the order made by the Assessing Officer "under section 210, the assessee shall still be liable to pay the interest under section 2348 & 234C, if the advance tax is not paid as per the requirements of section 211 (2. Ifthe estimate made by the assessee in Form No. 28A is not correct, then the assessce shall be ___ deemed to be an assessee in default and shall be liable to penalty under section 221, i296 Corporate Tax Planning & Management [5 ‘The assessee cannot file appeal against the order passed under section 210 as he can pay & | omhis own estimate. 12.7 Instalments of advance tax and due dates [Section 211] (1) Due date of instalments of advance tax payable by all assesses other than covered: 44AD [Section 211(1)(a)]; Alll the assessees, other than the assessee referred to in clause (see para (2) below), who are liable to pay the advance tax shall pay the same, in instalments during each financial year and the due date of each instalment and the amouss such instalment shall be as specified in the Table below: Table 1 rere aceasta ‘Onor before the 15th June _| Not less than 15%. of such advance tax. | On or before the 15th Not less than 45% of such advance tax, as reduced by September amount, if any, paid in the earlier instalment. ‘On or before the 15th Not less than 75%. of such advance tax, as reduced by December amount or amounts, if any, paid in the earlier instalment instalments. ‘On or before the 15th March | The whole amount of such advance tax, as reduced by amount or amounts, if any, paid in the earlier instalment instalments; i ss ‘Advance tax payable by the assessee covered under section 44AD or 44ADA [Sect 211(1)(b)]: An eligible assessee in respect of an eligible business referred to in section 44 or 44ADA, as the case may be, shall pay the advance tax, to the extent of the whole ams of such advance tax during each financial year on or before the 15th March: ‘Although, last date of payment of whole amount of advance tax is 15th March of the rel financial year, but any amount paid by way of advance tax on or before the 31st March also be treated as Advance Tax paid for that financial year. The assessee will, however, liable to pay interest on the late payment. [Proviso to section 211(1)] If the advance tax is payable on the basis of order/amended order passed by the A: Officer which is served after any of the due dates specified above, the appropriate amount the whole amount of the advance tax, as the case may be, specified in such order, shall payable on or before each of such of those dates as fall after the date of service of the o [Section 211(2)] ‘After making the payment of Ist/2nd instalment of advance tax, the assessee of increase/decrease the amount of remaining instalments of advance tax in accordance with revised estimates of Current income. In this case, he will have to pay interest for s ‘payment of earlier instalments. Illustration 12.1: Compute the Advance Tax payable by R from the following estimated ine submitted for the financial year 2022-23: (0)_ [Gross Salary (2) Rent from house property (per annum) (3) Interest on Government securities | @) [interest on saving bank depositsn Advance Payment of Tax Receipt from horse race (net) 297 T 144 Agricultural Income Contribution towards PPF SSeducted at source by the employer on salary is €41,600 se he does not intend to Opt for Section 115BAC Computation of Estimated Total Income for the finaficial year 2022-23 | 2,90,00% 20,00 ne from Salary salary 6,10,004 Standard deduction from House Property 50,000, 5,60,000, ceived 150,000 Statutory deduction under section 24(a) @ 30%) 45,00 from Other Sources ‘on Government securities 8,00 Ss on Saving Bank Deposit Races (Gross) 3,000 20,000, 31,0 ed Gross Total Income 6,96,000 Deductions section 80C 20,00 Section 80TTA 3,000, 23,000 6,73,000 sed Tax Add (Agricultural income + Non-Agricultural income) 00 + 6,73,000) = 9,63,000 Income from Horse Race of €20,000 @ 30% 6,000 income of €9,43,000 1,01,100, 1,07,10 some (2,50,000 + step-1 - Tax under step-2 (&1,07,100 - 20,500) tax payable ith and education cess @ 4%298 Corporate Tax Planning & Management [Less: Estimated TDS mn salary 41, mn horse races 6,00 lAdvan tax payable (rounded off) First installment payable by 15.6.2022 (15%) = | Second installment payable by 15.9.2022 (30%) [Third installment payable by 15.12.2022 (30%) Fourth installment payable by 153.2023 (25%) Working notes: Computation of gross winnings from horse races: | Net Amount | Grossing up 14,000 x 2 Tax deducted at source (Gross amount 220,000 - Amount received €14,000) 12.8 Payment of advance tax in case of capital gains/easual income [Proviso to section 234C] As already discussed, advance tax is payable on all types of income, including capital gains winnings of lotteries, crossword puzzles, dividend etc, However, it is not normally possible for assessee to estimate the following incomes: (@ the amount of capital gains; or (ii) winnings from lotteries, etc.; or (ii) income under the head "business or profession” in cases where the income accrues and under the said head for the first time as the business might have been started after c due dates of payment of advance tax; or (iv) the amount of dividend income. Therefore, in such cases, it is provided that if any such income arises after the due date of! instalment, then, the entire amount of tax payable (after deduction of tax at source, if any) on s capital gain or winnings from lotteries, etc. or income from business or profession or income & dividend should be paid in remaining instalments of advance tax which ate due or where no instalment is due, by 31st March of the relevant Financial Year. If the entire amount of tax payall so paid, then no interest on late payment will be leviable. 12.9 Assessee Deemed to be in Default [Section 218] If any assessee does not pay on the specified dates, any instalment of the advance tax that required to pay, he shall be deemed to be an assessee in default in respect of such instalmex instalments and shall be liable to interest and penalty under sections 220 and 221 12.10 Credit for Advance Tax [Section 219] Any sum, other than a penalty or interest, paid by or recovered from an assessee as advance ll be treated as a payment of tax in respect of the income of the previous year and credit Set be civen to the assessee in the regular assessment. Seterest payable if Advance Tax is not paid or paid less than 90% [Section 234B] ee tax is not paid or the amount of advance tax paid is less than 90% of the assessed bell be liable to pay simple interest @ 1% per month from first day of April foll under section 234B.Advance Payment of Tax 299 2 Interest for deferment of advance tax [Section 234C] Advance tax has to be paid in various instalments. If any instalment is not paid or less paid, t is chargeable for non-payment or late payment of such instalment. The interest is computed as (®) Anassessee, other than an eligible assessee in respect of the eligible business referred to in section 44D, who is liable to pay advance tax under section 208 has failed to pay such tax or has made late payment of advance tax, shall pay the interest under section 234C as under— Circumstances in which Rateot | Period Amount on which interest is payable ws | interest interest is to be paid 234C = @ @ ) @ = Where advance tax paid on | Simple Three months | 15% of tax due on or before June 15th is less | interest @ 1% rétumed income minus than 12% of tax due on | pm. advance tax paid upto returned income 15th June Where advance tax paid on | Simple Three months | 45% of tax due on or before 15th September | Interest @ 1% retumed income minus is less than 36% of tax due’| p.m total advance tax paid on returned income upto 15th September Where advance tax paid on | Simple Three months [75% of tax due on ot before 15th December is | Interest @ 1% returned income minus less than 75% of tax due on | p.m, total advance tax paid retuned income | upto 15th December Where advance tax is paid | Simple One month | 100% of tax due on ‘on or before 15th March is | Interest @ 1% returned income minus less than 100% of tax due | p.m. total advance tax paid on returned income | upto 15th March 2) Interest payable in case of non-payment of advance tax by 15th March by the eligible assessee of the eligible business referred to in section 44AD [Clause (6) to section 234C(1) amended] An eligible assessee in respect of the eligible business referred to in section 44AD, who is liable to pay advance tax under section 208 has failed to pay such tax or the advance tax paid by the assessee on its current income on or before the 15th March is less than the tax due on the retumed income, then, the assessee shall be liable to pay simple interest @ 1% on the amount of the shortfall from the tax due on the returned income,