How to compute and pay advance tax ?

By | November 2, 2016
(Last Updated On: November 2, 2016)

 Advance tax

Advances Tax

Income liable for advance tax

Advance tax is payable under section 211 of Income tax Act.All income (including capital gains, winnings from lotteries, crossword puzzles, etc.). are taken into account to compute Advance Tax Liability.

Who is not required to Pay Advance Tax ?

Resident individuals who are over 60 years of age and do not have income chargeable under the head ‘Profits and Gains of Business or Profession’ are not required to pay advance tax.

When Advance Tax has to be paid ?

When the tax payable for the year is Rs. 10,000 or more. then person has to pay Advance Tax

 Make an estimate of current year’s income (the estimate is not required to be filed with the tax authorities).

How is advance tax calculated ?

An assessee who is liable to pay advance tax will be required to estimate his current income and pay advance tax thereon. Process is as follow :-

  • Make an estimate of current year’s income (the estimate is not required to be filed with the tax authorities).
  •  Deduct all allowable deductions under Chapter VIA.
  •  Compute the tax on the remaining income at the rates in force during the financial year.
  • From such tax deduct the tax deducted at source.
  • The residue is the advance tax payable and appropriate percentage thereof along with surcharge, if any, should be deposited in any authorised bank along with a duly filled in advance tax challan.Computation of total income and tax liability for the year for Advance Tax
    ParticularsAmount
    Income from salaryXXXXX
    Income from house propertyXXXXX
    Profits and gains of business or professionXXXXX
    Capital gainsXXXXX
    Income from other sourcesXXXXX
    Gross Total IncomeXXXXX
    Less : Deductions under Chapter VI-A (i.e., under section 80C to80U))(XXXXX)
    Total Income (i.e., taxable income)XXXXX
    Tax on total income to be computed at the applicable rates (for rates of tax, refer “Tax Rate” section)XXXXX
    Less : Rebate under section 87A(XXXXX)
    Tax Liability After RebateXXXXX
    Add: SurchargeXXXXX
    Tax Liability After SurchargeXXXXX
    Add: Education cess @ 2% on tax liability after surchargeXXXXX
    Add: Secondary and higher education cess @ 1% on tax liability after surchargeXXXXX
    Tax liability before rebate under sections 86, section 89, sections 90,90A and 91 (if any) (*)XXXXX
    Less : Rebate under sections 86, section 89, sections 90, 90A and91(if any) (*)(XXXXX)
    Tax liability for the year before pre-paid taxesXXXXX
    Less: Prepaid taxes in the form of TDS, TCS(XXXXX)
    Total Advance Tax for the year that needs to be paidXXXXX

    (*) Rebate under section 86 is available to a member of association of persons (AOP) or body of individuals (BOI) in respect of income received by such member from the AOP/BOI.

    Rebate (i.e., relief) under section 89 is available to a salaried employee in respect of sum received towards arrears of salary, gratuity, etc.

    Rebate under sections 90, 90A and 91 is available to a taxpayer in respect of double taxed income, i.e., income which is taxed in India as well as abroad.

    Note : For provisions relating to Minimum Alternate Tax (MAT) in case of corporate taxpayers and Alternate Minimum Tax (AMT)  in case of non-corporate taxpayers refer tutorial on “MAT/AMT”.

How is advance tax paid?

Advance tax is to be calculated on the basis of expected tax liability of the year. Advance tax is to be paid in instalments as given below:

    a) In case of all the assessees (other than the eligible assessees as referred to in section 44AD) :
    i) Up to 15 per cent – On or before 15th June
    ii) Up to 45 per cent – On or before 15th September
    iii) Up to 75 per cent – On or before 15th December
    iv) Up to 100 per cent –On or before 15th March
    b) In case of eligible assessee as referred to in Section 44AD:

Up to 100 per cent – On or before 15th March

Note: Any advance tax paid on or before 31st day of March shall also be treated as paid during the same financial year.

[Substituted by the Finance Act, 2016 w.e.f. 1-6-2016]

Challan for Deposit of Advance Tax

The deposit of advance tax is made through challan ITNS 280 by ticking the relevant column, i.e., advance tax.

Online Payment of Challan ITNS 280

Click to Pay Online ITNS 280

Physical payment to Bank through ITNS 280

Download Challan ITNS 280

Payment of advance tax in pursuance of order of Assessing Officer

If, despite the legal obligation cast upon a taxpayer ,who had earlier been assessed to income-tax,, he fails to pay advance tax (or advance tax is lower than the correct amount), the Assessing Officer may pass an order requiring him to pay advance tax on his current year’s income (specifying the amount of instalments in which tax has to be paid). Such an order must be passed during the financial year but not later than the last day of February.

On receipt of the notice from the Assessing Officer to pay advance tax the assessee can submit his own estimate of lower current income/advance tax and pay tax accordingly. In such a case he has to send an intimation in Form No. 28A to the Assessing Officer

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