Post Mortem

Advance Tax simplified

By Nagaland Post | Publish Date: 3/13/2021 1:11:43 PM IST

 As the end of Fiscal (Financial) Year is closer, a hectic business schedules in financial institutions are seen during March ending. With Assembly Elections around the corner, another publicity campaign for paying the last installment of Advance Tax on or before 15th March 2021 is in the offing. There are several initiatives taken by the Income Tax department for ease of doing transactions in banks. India is not the only country who follows April to March Financial Year. Canada, UK, New Zealand, Hong Kong and Japan also follow this trend.

India has a structured tax system. Its tax rates, brackets and slabs are determined largely by the central and state government and accompanied by a law passed by the parliament or state legislature. Direct taxes (Income Tax, Corporate Tax, Capital Gains Tax, Property Tax and Entitlement Tax) are levied directly on the taxable income generated by individual and corporations. Indirect taxes (GST, Dividend Distribution Tax, Custom Duty and Securities Transaction Tax) are levied indirectly while purchasing goods and services.

Our contributions to Income Tax raise essential revenue to our nation. Interestingly for every rupee in government kitty, 53 paise come from Direct and Indirect Taxes. However common terminologies such as Financial Year (FY), Assessment Year (AY) and Previous Year (PY) always make everyone confused. From an Income Tax perspective, FY is the year in which you earn an income. AY is the year following the FY in which you have to evaluate the Previous Year’s income and pay taxes on it

Advance Tax (Direct Tax) paid in advance. I don’t think many tax payers would know with that paying an interest on the late payment of Advance Tax. It can lead to late payments or no payments at all, which will attract heavy interest and penalties. It is penalized during Income Tax Return (ITR) under Section 234 C (1% per month for a period of 3 months on the amount of shortfall/failure) and Section 234 B (1% per month for default in payment in Assessment Year, if less than 90% of total Tax Liability). Also there is another Section 234 A, where 1% per month is for default in furnishing ITR (usually 31st July).

Now the question arises, who are the Advance Tax payers? As per the provisions of the Section 207 of the Income Tax Act,1961, every Assessee (including salaried, freelancers, professionals and senior citizens) shall estimate his Income and Tax Liability for any previous year and Income Tax and be paid in advance in accordance with under section 211. Under Section 208, a person shall be liable to pay Advance Tax only if Tax Liability (after adjusting for TDS) exceeds Rs.10,000. 

Salaried individuals under TDS net are not required to pay. However, they may still need to pay on income from other sources such as interest, capital gains, rent and other non-salary income. Senior Citizens (aged 60 and above) who do not have Income under head Business or Profession shall be exempted. In Budget 2021, it has been proposed to exempt them from filing ITR, if pension income and interest income are their only annual income source. Section 194P has been newly inserted to enforce the banks to deduct tax on senior citizens more than 75 years of age who have a pension and interest income from the bank.

Under Section 211, the Advance Tax shall be paid by the individuals and corporate tax payers on or before 15th June (15% of tax payable), 15 September (45%), 15th December (75%) and 15 March (100%). Also the payment of advance tax on or before 31 March is still treated as advance tax. Assessee can pay tax upto 31st March for Capital Gains or Casual Income after 15th March of that Previous Year to avoid Interest us/ 234C and 234B.

Calculation of Advance Tax Liability is simple. Advance Tax calculator is available online on income tax department website. All we need to add all income such as salary, house property, capital gain, income from other sources, profits and gains of business or profession and agricultural income. After deduction in 80C (max 1.5 lakh), Medi-claim 80D, medical treatment 80DDB, interest payable on loan for residential house property 80EEA, interest payable on loan for purchase of electric vehicle 80EEB, donations 80G, maintenance/medical treatment of dependent 80DD, interest on loan for higher education 80E, interest on loan taken for residential house 80EE, disability 80U, interest on deposits in saving account 80TTA, total tax liability will be calculated under applicable tax slab after adding Health and Education Cess @ 4%. 

Income Tax department is committed to provide prompt, courteous and professional assistance in all dealings with the taxpayer and expects taxpayers to be honest and compliant. Individuals may pay Advance Tax by using Challan ITNS 280 and selecting “Type of Payment as (100) Advance Tax” at bank branches authorized by the IT Department.Payment can also be made using net banking facility of major banks in India. The status of Advance Tax payment challan can be checked from https://tin.tin.nsdl.com/oltas.index.html putting CIN (Challan Identification Number) in Based view. Also can be seen from incometaxindiaefiling.gov.in at My Account in View form 26AS (Tax Credit). If tax paid (more than 10%) higher than liability, it is entitled to get 6% interest from Income Tax Dept. There is another provision for opting taxation under section 115BAC (w.e.f. AY 2021-22) without any exemption or deduction which will minimize total tax liability.

Citizens are taxed in proportion to their economic circumstances thereby encouraging social and economic equality. Advance Tax payments benefit both the government and the individual/organization paying it. From the government’s perspective, it provides a continuous flow of income throughout the year. From the individual/organization’s perspective, it reduces the year-end burden of paying taxes in a lump sum. Non-payment of advance tax could result in the taxpayer being liable to interest under the Income Tax law. Hence, timely payments of Advance Tax should be made. At the same time it generates the revenue required by the Government for financing public welfare and developing country’s infrastructure. 

Kamal Baruah

Launched on December 3,1990. Nagaland Post is the first and highest circulated newspaper of Nagaland state. Nagaland Post is also the first newspaper in Nagaland to be published in multi-colour.

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