What is provisions, applicability and computation of advance tax? – CN 280 for payment of advance tax

How to send a legal notice for non-payment of salary
July 19, 2020
Income tax return file for minors
July 19, 2020

What is provisions, applicability and computation of advance tax? – CN 280 for payment of advance tax

It is easier on the part of the Income Tax Department to collect taxes at regular intervals and proceed for processing of refunds only when Income Tax Return is filed by the taxpayer. To reduce the compliance burden on the taxpayer, the department came up with the concept of Advance Tax.

Advance Tax

The provisions of advance tax are stated under Section 208 of the Income Tax Act, 1961 where every assessee whose estimated tax liability for the previous year is Rs 10,000 or more is required to make payment of advance tax to the government.

Advance tax is to be paid by every individual/HUF/ Company/Trust/ Body of Individuals /Association in case the tax liability reaches Rs 10,000 or exceeds Rs 10,000.

As per IT Act, 1961, the exemption is provided in any of the following cases from payment of advance tax :

  • Where the taxpayer is more than 60 years old i.e., is under the category of Senior citizens and receiving business income; or
  • Where the tax liability of the person is below Rs 10,000; or
  • Where the taxpayer is a salaried employee and TDS has already been deducted every month from his salary account.
Calculation of Advance tax
By Individuals / HUF/ Companies/ Associations
Particulars Amount
Income from Business / Profession/ Salary XXXX
Add:  Income from House Property XXXX
Add:  Income from Capital gains and other sources XXXX
Less:  Deductions and Exemptions (XXXX)
Net  taxable income XXXXX
Income tax on Net Taxable Income XXXX
Add: Surcharge and Cess applicable XXXX
Total Tax Liability XXXX
Less: Rebate (u/s 87A or other as applicable) (XXXX)
Less: TDS/TCS amount prepaid (XXXX)
Advance tax payable XXXX
Due Dates for Payment of Advance Tax
For Individuals / HUF/ Companies/ Associations
Due date of installment Amount payable
On or Before 15th  June 15% of the tax liability
On or Before 15th  September 45% of the tax liability
On or Before 15th  December 75% of the tax liability
On or Before 15th  March 100%  of the tax liability
For Assessee Computing profits under presumptive  basis under Section 44AD(1) or Section 44ADA(1)
Due date of installment Amount payable
On or Before 15th  March 100%  of the tax liability
Things to Know About Advance Tax
  • Calculation of advance tax is just like calculation of normal Income Tax which is paid at the end of the year. So, all necessary expenses like depreciation, remunerations or commissions paid in case of business income and expenses made for medical expenses or income on which TDS has been deducted in all have to be deducted while calculating Advance Tax.
  • If advance tax is to be paid on receipt of an order under Section 210(3)from the assessing officer, and in case the calculation of advance tax is lower then what is computed by the assessing officer, then the taxpayer has to file a response to the officer.
  • Even after making payment of first or second or third installment of advance tax, if there is any change in the tax liability of the taxpayer he can further revise his advance tax and pay the required tax amount or excess is paid can claim for refund at the time of filing of the Income Tax Return.
  • As stated in Rule 125of the Income Tax Rules, 1962, corporate taxpayers shall only use electronic payment mode or internet banking facility while making payment of advance tax. While individual taxpayers can pay advance tax in any of the payment modes such as by making physical payment filing the Challan at the bank or electronically.