FAQs

Frequently Asked Questions on Advance Tax

Q. Is there any compliance if an assessee revises its estimate of income for advance tax?

​​An assessee can revise the estimation of income and pay the taxes accordingly without any requirement of filing the estimation of income with the department.​

Q. Can estimate of income be revised for the purpose of advance tax?

​In case the assessee wants to revise the estimate of income after making payment of first/ second installment of advance tax, the assessee can revise the remaining installment of advance tax in accordance with his revised estimate of current income and pay the advance tax accordingly.​

Q. What will be the due date for the payment of advance tax if the same is payable by virtue of an order from the Assessing Officer/ Income Tax Officer?

​​Where advance tax is payable due to the notice of demand issued by Assessing Officer then whole or part of the advance tax is payable in the remaining installments, i.e., installments due during the financial year after the date of the notice.

Q. Who is not required to pay Advance tax?

  • ​​​​A resident senior citizen(i.e., an individual of the age of 60 years or above during the financial year) not having any income from business or profession is not liable to pay advance tax.
  • A taxpayer who opted for the presumptive taxation scheme of section 44AD or section 44ADA is liable to pay 100% of advance tax by 15th March.

Q. Can I claim the deduction of Advance tax payments against my profits?

Advance Tax is not an expense.

  • It is considered as an asset and adjusted against one’s tax liabilities at the time of the finalization of the Balance Sheet.
  • It is a charge on income and not considered as an expenditure.
  • It is shown under Loans and Advances in the Balance Sheet.​

Q. What to do if I forgot to bifurcate the amount of tax, surcharge, and Cess while making the online payment? ​

  • Showing the total tax liability as Income tax, Education cess, Surcharge, etc., is advisable.
  • However, in the event the bifurcation of tax payment like income-tax, surcharge, Cess, etc., is not done due to any reason, there is no need to panic.
  • While filing the income-tax return just mention the total amount. in the income-tax column and that would be sufficient. However, at the time of filing an income tax return, you should fill up the correct bifurcation details and then CPC will check it properly at the time of processing.​

Q. How do advance tax paid to get reflected in Form 26AS?​

​Once the Advance Tax is paid, it will be reflected on assessee’s Form 26AS within 3-4 working days of making the payment.

  • The banks upload challan details to TIN in 3 working days after the realization of the tax payment online.
  • After the bank uploads the details of self -assessment/advance tax to TIN, it is automatically posted into assessee’s Form 26AS.
Read | FAQs on Authority for Advance Ruling

Q. What should be kept in mind while making payment of tax?

​While making payment of tax, apart from other things, one should clearly mention the following details :

  • Head of payment, e., Corporation Tax/Income-tax (other than companies)
  • Amount and mode of payment of tax
  • Type of payment [e.,Advance tax/Self-assessment tax/Tax on regular assessment/Tax on Dividend/Tax on distributed Income to Unit holders/Surtax]
  • Assessment year – this is a general error that assessees commit as AY is different from Financial year
  • The unique identification number called PAN [Permanent Account Number] allotted by the IT Department.
  • The details are displayed on the screen and should be confirmed before proceeding with payments.​

Q. How to compute advance tax on capital gains income?

Advance tax is payable on total income which includes capital gains and casual income (i.e., income from lotteries, crossword puzzles, etc.).

However, it is practically not possible to estimate the income from capital gain and casual income in advance. Therefore, in such cases, it is provided that if any such income arises after the due date of any installment, then the tax calculated on capital gain and casual income shall be paid in remaining installments of advance tax which are due.

If the entire amount of tax is so paid then no interest for late payment is levied.

Read this: General FAQs of Income Tax

Q. In case of advance tax, when is assessee considered as assessee-in-default?​

​​For the purpose of advance tax, an assessee will be considered as assessee-in-default if he:-

  1. does not pay the advance tax on receiving the order from Income-tax officer as per the due dates, or
  2. does not file an intimation in Form 28A before the installment due date.

Q. What should we do if the bank is closed on the last day for payment of advance tax?​​

  • Any taxes paid till 31st March will be treated as advance tax.
  • If the last day for the payment of advance tax is the day on which the banks are closed, then one should pay the advance tax on the immediately following working day and no interest shall be charged on such payments of advance tax.

Note: The CBDT vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 ​dated 31-03-2020 has extended all respective due dates, falling during the period from 20-03-2020 to 29-06-2020, till June 30, 2020.

The benefit of the extended due date shall not be available in respect of payment of tax. However, any delay in payment of tax which is due for payment from 20-03-2020 to 29-06-2020 shall attract interest at the lower rate of 0.75% for every month or part thereof if the same is paid after the due date but on or before 30-06-2020.

​Q. Does credit of TDS allowed while calculating advance tax?

​​​​​As per section 208 of the income-tax Act, 1961, every person whose estimated tax liability for the year is INR 10,000 or more, after TDS (taxes deducted at source), shall pay advance tax.

Therefore, credit of TDS is to be taken while calculating the advance tax liability.

However, if the amount is given or credited by payer without deduction of tax then the benefit of TDS cannot be given while calculating the advance tax liability.

Q. Who is responsible to file Form 28A?

​In case the Assessing Officer’s estimation of current income is more than the assessee’s estimate then the assessee is required to file an intimation in Form no. 28A giving an estimate of income and advance tax.

The estimation is required to be filled and signed by a person who is authorized to sign a return of income.

  • In the case of a registered firm, the firm has to submit the estimate of advance tax payable, if any.
  • The individual partners have also to submit an estimate of the advance tax payable by each partner including therein the share of income from the registered partnership firm.
  • In case of a HUF, which has no member and whose total income of the previous year is likely to exceed the maximum amount not chargeable to income-tax then a declaration is required to be filed from all members.

Q. What is Form 28A?

​In case the Assessing Officer’s estimation of current income is more than the assessee’s estimate then he is required to send an intimation in Form no. 28A giving estimates of such reduced income and advance tax.

The form is prescribed under Rule 39 of the Income-tax Rules (Form No. 28A).​

Q.What should I do on receiving the notice from the income-tax department for the payment of advance tax, if my actual income is more than what is determined by the tax officer? ​

Assessing Officer can serve an order requiring the assessee to pay advance tax if he is of the opinion that such person is liable to pay advance tax.

  • However, if you feel that year advance tax liability is lower than the liability calculated by the income-tax officer; you may file an estimation of the income and amount of tax payable thereon
  • Such information should be submitted in Form No. 28A to the Assessing Officer
  • Alternatively, In case the tax demand calculated by the Income-tax officer is lower than the tax liability computed by you, you should pay the advance tax as per your own computation.
  • No intimation to the Income-tax officer is required to be made in such cases.

​Q. Which tax rates are to be used for computing advance tax liability?​

​​For computing, the advance tax liability of the prevailing tax rates or the rates in force of the previous year for which the advance tax is to be computed is to be used.

Click here to calculate Advance Tax Liability

Q. When Assessing Officer is​ liable to determine the Advance tax liability?

  • ​​If a taxpayer who has a legal obligation to pay advance tax fails to make payment for advance tax or advance tax is lower than the correct amount AO may pass an order asking the taxpayer to pay tax on assessee’s current year income
  • Such order shall clearly specify the amount payable and in number of installments the same needs to be paid
  • Such order should be passed anytime during the previous year but before 1st March, i.e., by 28th February

Computation by the Assessing Officer

  • Assessing Officer can serve an order requiring the assessee to pay advance tax if he is of the opinion that such person is liable to pay advance tax or the tax paid is lower
  • In such cases, the Officer will take the higher of following incomes and calculate the tax as per the prevailing rate of income-tax:-​

(a)The total income of the latest previous year in respect of which Officer has assessed income, i.e., the year for which an assessment has been completed by the Income-tax Officer,

or

(b)   The total income declared by the assessee in any return after the year of assessment by an officer., i.e., Any income furnished by the assessee in Income-tax return for any previous year after

Q. What is the procedure for computing advance tax?

​​Advance tax is liable to be paid in every case where the advance tax payable is Rs. 10,000 or more. A Resident Senior citizen not having any income from business/profession is not liable to pay advance tax with effect from A.Y 2013-14 onwards.

An assessee who opts for the presumptive taxation scheme under section​ 44AD and section 44ADA is required to pay advance tax related to such business. However, advance tax can be paid during the financial year (immediately preceding to the assessment year) on or before March 15.

The computation of advance tax can be done in the following manner:

Income from salaries xxx
Income from house property xxx
Income from Capital Gains xxx
Income from Business or Profession xxx
Income from other sources xxx
Gross Total Income xxx
Less: Deductions under sections 80C to 80U xxx
Net Income xxx
Income Tax on Net Income xxx
Less: Rebate under section 87A xxx
Balance xxx
Add: Surcharge if any, xxx
Total xxx
Add: Health and Education Cess @4% xxx
Total xxx
Less: Relief under section 89, 90, 90A or 91 xxx
Less: Pre-paid taxes (i.e. advance tax, self -assessment tax, TDS, TCS, MAT/AMT credit) xxx
Advance Tax Liability xxx

Click here to calculate Advance Tax Liability

Read | Computation of Income Tax – FAQs & Examples

Q. What is the due date for payment of Advance Tax and Self Assessment tax?

​​​(A) Click here to view the step by step guide for payment of taxes.

(B) LAST DATE FOR PAYMENT OF SELF ASSESSMENT TAX

As per section 140(1), the Payment of income-tax on self-assessment should be done by the assessee before the date of filing of return of income. The payment made after the due date of filing return of income attracts interest under section 234A.

(C)LAST DATE FOR PAYMENT OF ADVANCE TAX

(b)   The due dates for payment of different installments of advance tax are as follows:-

      (I)   For assessees (other than those covered under section 44ADA of the Income-tax Act, 1961)

On or before 15th June 15% of advance tax
On or before 15th Sept 45% of advance tax
On or before 15th Dec 75% of advance tax
On or before 15th March 100% of the advance tax

(ii) For assessees covered under section 44AD and section 44ADA (under presumptive taxation scheme) of the income-tax Act, 1961, are required to pay advance tax on or before 15th Mar

Note: The CBDT vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, dated 31-03-2020, has extended all respective due dates, falling during the period from 20-03-2020 to 29-06-2020, till June 30, 2020.

The benefit of the extended due date shall not be available in respect of payment of tax. However, any delay in payment of tax which is due for payment from 20-03-2020 to 29-06-2020 shall attract interest at the lower rate of 0.75% for every month or part thereof if the same is paid after the due date but on or before 30-06-2020.

Read this also: Income Tax audit under section 44AB​: FAQs

Q. Who is liable to pay Advance tax?

​​​​​As per Section 208 of the Income Tax Act,

  • Every person (individual, firm, company, etc.)
  • whose estimated tax liability for the year (i.e., for the year in progress such as FY 2016-17, FY 2017-18,  etc.)
  • after TDS (i.e., TDS which is deducted for the person by its payers/clients/banks, etc.)
  • Is Rs. 10,000 or more
  • shall pay its tax for the year in advance during the same financial year
  • Such tax shall be paid in installments
  • Individuals, having only salary income are not required to pay advance tax as the liability to deduct and deposit tax is on the employer making such payment in the form of TDS​
  • Can payment of advance tax be made through any bank account?​
  • It is not necessary to make the payment of taxes from assessee’s own account in an authorized bank.
  • An assessee can make the payment from the account of any person.
  • However, the challan for making such payment must clearly indicate the Permanent Account Number of the assessee on whose behalf the payment is made.​
Source
CBDT

TaxClue Team

Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building. TaxClue is a team of young professionals. We started in December 2016 with the mission of knowledge sharing. TaxClue would like to hear your valuable suggestion. Please write to our editorial team at [email protected]

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