ADVANCE PAYMENT OF TAX

Liability for payment of advance tax [Sections 207 & 208]

Tax shall be payable in advance during any financial year in respect of the total
income (TI) of the assessee which would be chargeable to tax for the A.Y.
immediately following that financial year.
Advance tax is payable during a F.Y. in every case where the amount of such
tax payable by the assessee during the year is ` 10,000 or more.
However, an individual resident in India of the age of 60 years or more at any
time during the previous year, who does not have any income chargeable
under the head “Profits and gains of business or profession” (PGBP), is not
liable to pay advance tax.

Advance tax receipts help the government to get a constant flow of income
throughout the
year so that expenses can be incurred rather than receiving all tax payments
at the end of the
year.

Liability of Assessee to Pay Advance Tax

As per section 208, every person whose estimated tax liability for the year is
Rs. 10,000 or
more, shall pay his tax in advance, in the form of “advance tax”.
Person Not Liable to Pay Advance Tax
Certain persons are not liable to pay advance tax even if their tax liability is
Rs. 10,000 or
more:

1. A resident assessee 60 years or more, not having any income from

business or
 profession, need not pay advance tax and are allowed to discharge their
tax liability
(other than TDS) by payment of self-assessment tax,
2. An assessee who has opted for the Presumptive Taxation Scheme under
section 44AD
on at the rate of 8 per cent of turnover, shall be exempted from
payment of advance
tax related to such business w.e.f. from the assessment year 2011‐ 12.

Scheme of section 44AD

1. The scheme of section 44AD, commonly known as CC small taxpayers

engaged in a business (other than the business of plying, hiring or
leasing of goods carriages referred to in section 44AE).
2. A taxpayer adopting these provisions will not be required to maintain
the regular books of account and is also exempt from getting the books
of account audited .
3. This scheme can be opted for by the eligible assessee who is engaged in
a business (except the business of plying, hiring or leasing goods
carriages referred to in section 44AE), whose turnover or gross receipts
from such business do ot exceed the limit prescribed (i.e., Rs.
1,00,00,000 from the previous year 2012-13).
4. The provisions of section 44AD are applicable to resident assessee who
is an Individual,Hindu Undivided Family and Partnership Firm but not
an LLP.
5. The Presumptive Taxation Scheme under section 44AD cannot be
adopted by an assessee who is engaged in any profession as prescribed
under section 44AA or is carrying on an agency business or is earning
income in the nature of commission or brokerage.
6. If an assessee adopts this scheme, his income will be computed on an
estimated basis. The rate of computation of income on an estimated
basis is 8% of turnover or gross receipts of the eligible business for the
previous year.

Adjustment of Advance Tax

Section 219 states that the total advance tax paid by an assessee other than for
interest is to be adjusted against the total tax liability computed under regular
assessment. If an assessee, who is liable to pay advance tax, under Section 208
has failed to pay such tax or where the advance tax paid under Section 210 is
less than 90% of the assessed tax, he shall be liable to pay interest @ 1% for
every month or part of the month.

Instalments of advance tax and due dates [Section 211]

Advance tax payment schedule for corporates and non-
corporates (other than an assessee computing profits on
presumptive basis under section 44AD or section 44ADA) –
Four instalments
Due date of Amount payable
instalment
On or before 15th June Not less than 15% of advance tax
liability.
On or before 15th Not less than 45% of advance tax
September liability (-) amount paid in earlier
instalment.
On or before 15th Not less than 75% of advance tax
December liability (-) amount paid in earlier
instalment or instalments.
On or before 15th The whole amount of advance tax
March liability (-) amount paid in earlier
instalment or instalments.

NOTES:
1. Any payment of advance tax payable made before March 31 shall be treated
as advance tax paid during the financial year.
2. In case of public holiday or bank holiday, date of payment automatically
falls in the next working day. Interest is not charged for that delay.
3. Tax is to be computed at the prevailing rate on the current income of the
assessee, in a financial year
Mode of Payment of Advance Tax
It is mandatory for a corporate taxpayer (i.e., a company) and a tax payer
under section 44AB to pay taxes through the electronic payment mode using
the internet banking facility of the authorised banks.

Other taxpayers can pay tax either by electronic mode or by physical mode i.e.
by depositing the challan at the receiving bank.
Change in Tax Liability after Making Payment of First or Second Installment
If, after paying first or second installment of advance tax, there is a change in
the tax liability, then the taxpayer can revise the amount of advance tax in the
remaining installments and pay the tax according to revised tax liabilty.

Role of Assessing Officer in Relation to Advance Payment of Tax

1. An Assessing Officer (AO) can order payment of advance tax if following
conditions are satisfied:
a) The assessee has already been assessed by way of regular assessment in
respect of total income of any previous year.
b) The assesse has failed to pay such tax.
c) The AO is of the opinion that such person is liable to pay advance tax on
current year’s income.
d) The order must specify the amount of advance tax and installments in
which advance tax has to be paid.
e) The order must be made in writing.
f) Such order may be passed during the previous year but not later than last
day of February.
2. The assessee can pay advance tax at a rate lower than assessment made by
the AO, after submitting his own estimate of income in Form No. 28A.
However, for higher estimate made by the assessee, Form 28A is not
required to be furnished.
3. The AO will find out the current income of the assessee on the following
basis:
a) Total income of the latest previous year in respect of which the assessee
has been assessed by way of regular assessment.
b) The total income returned by the assessee for any previous year
subsequent to the previous year for which regular assessment is made,
whichever is higher.
4. Section 210(4) provides that AO can revise his order issued to the taxpayer
to pay advance tax (as discussed above), if subsequent to the passing of an
order to pay advance tax but before 1st March of the relevant financial
 year, (i) a return of income in respect of any later year has been
furnished by the taxpayer or (ii) any assessment for any later year has
been completed, at a higher figure. On receipt of such order, the procedure
to be followed by the taxpayer will be same as discussed earlier.