Tax Planning And Management

Advance Payment
of Tax
Submitted by: Prachi Chandra
Roll No.: 07
 Overview
• Advance Tax
• Computation & Payment of advance tax
• Installments of advance tax and due dates
• Interest for defaults in furnishing return of income
• Interest on defaults in payment of advance tax
• Interest on deferment of advance tax
 Payment of Advance Tax
• An other method of collection of tax by the central
Government in the form of pre paid taxes. It is an
addition to deduction of tax at source. Also known as
“Pay as you Earn Scheme”.
• “Tax shall be payable in advance during any financial
year, in accordance with the provisions of Section 207
to 219 (both inclusive) in respect of the total income
of the assessee which would be chargeable to tax for
the assessment year immediately following the
financial year, such income being hereafter in this
chapter referred to as current income” [Section 207].
• When the liability to pay advance tax arises?
[section 208]
The scheme of advance tax is applicable to all
the assessees whose estimated total tax liability (
Calculated in prescribed manner) is Rs. 10,000 or
more. Such an assessee may be individual, HUF, Firm,
AOP/BOI or company, etc.
• Non-applicability of advance tax
(i) An assessee engaged in civil construction business
whose income is calculated on presumptive basis as
per Section 44AD.
(ii) A resident senior Citizen not having any income
from business or profession. [Section 207(2)]
 Computation of advance tax [Section 209]
(i) Calculation of advance tax payable u/s 209 (1), or (2)
1) Estimation of residential status.
2) Estimation of income under the five heads.
3) Application of provision relating to ‘clubbing of
income’.
4) Set off of past lesses.
5) Calculation of Estimated Gross Total Income Step (2)
+Step (3) – Step (4).
6) Claiming of estimated deduction u/s 80C to 80U.
7) Calculation of estimated Total Income as Step (5) –
Step (6).
……….
 Continued…

8) Calculation of estimated Tax on Total Income including

surcharge (if applicable) and education cess.
9) Claiming deduction of estimated ‘Tax deducted or
collected at sources’.
10) Finding estimated Net Tax as Step (8) – step (9)
ii) Assessee having agricultural income [Section 209(2)]
iii) Calculation of advance tax payable u/s 209(3)
iv) Calculation of advance tax payable u/s 209(4)
Payment of Advance tax [Section 210]
• Voluntary payment of advance tax. [Section 210(1)
• Increase or decrease in advance tax. [Section 210(2)
• Power of Assessing Officer[Section 210(3)]
• Amendment of order issued u/s 210(3) [Section
210(4)]
• Assessee to intimate for reduction/increase in advance
tax [Section 210(5)
 Instalments of advance tax and due dates
[Section 211]
Due Date of Instalment Amount Payable

(i) On or before 15th June Not less than 15% of such advance tax.

(ii) On or before 15th Not less than 45% of such advance tax
September less any amount paid in the 1st
instalment.
(iii)On or before 15th Not less than 75% of such advance tax
December less any amount paid in the 1st and 2nd
instalment.
(iv) On or before 15th Whole of amount of advance tax less
March amount deposited in earlier
instalments.
Interest for defaults in furnishing return of
income [Section 234A]
• Where the return of income for any assessment year
u/s 139(1) or (4) or 142(1) is furnished after the due
date or is not furnished, the assessee shall be liable
to pay simple interest @1% for every month or part
of the month comprised in the period commencing
on the date immediately following the due date and
ending on the date of actual filing of return.
It may be noted that advance tax if any,
paid and any tax deducted or collected at source
shall be adjusted out of assessed tax.
 Interest on default in payment of advance tax
[Section 234B]
• In case an assessee, who is liable to pay advance tax
u/s 208 has failed to pay such tax or where the
advance tax paid u/s 210 is less than 90% of the
assessed tax, the assessee shall be liable to pay
simple interest at the rate of 1% per month for every
month or a part of the month of default. The interest
will be calculated from 1st April of the assessment
year to the date of determination of regular
assessment u/s 143(1).
Interest of Deferment of advance tax [Section 234C]
• A-1 For deferment of any instalment
If advance Tax Paid upto Rate of Interest and Amount on which Interest is
Period to be Calculated

June 15, of assessment Simple interest @1% Difference between 15% of

year is less than 12% per month for 3 advance tax due on returned
months income and tax so deposited
Sept. 15, of assessment -DO- Difference between 45%......
year is less than 36% ……upto september, 15.

Dec. 15, of assessment -DO- Difference between 75%......

year is less than 75% …….upto December, 15.

March 15, of assessment -DO- Differenece between 100%..

year is less than 100% ….. Upto March, 15.
• Assessee deemed to be in default [Section 218]
• Credit of advance tax [Section 219]
Any sum, other than penalty or interest paid by
or recovered from assessee as advance tax, shall be
treated as a payment of tax in respect of the income
of the period which would be the previous year for
the assessment year next following the financial year
in which it was payable and credit shall be given to
the assessee in the regular assessment.

Thank You