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2016

Recent Update on Advance Tax

  • Around the 15th day of September, December and March we see advertisements from the government requesting all taxpayers to pay Advance tax. And this often makes many of us wonder, “What is Advance Tax”, “Is it applicable to me?” and questions like that. So to get a better understanding let us discuss the meaning, applicability and the most recent changes in the rules for paying advance tax for individuals.
  • As the name suggests, advance tax refers to paying a part of your taxes before the end of the financial year. Also called ‘pay-as-you-earn’ scheme, Advance Tax is the Income Tax Payable if your tax liability is more than Rs. 10,000 in a financial year.
  • Till 31st May, 2016 the due dates and the percentage of instalments of Advance Tax for assessees other than Companies were:
    Due Date of Installments Amount Payable
    1st instalment on or before 15th September Amount not less than 30% of such advance tax
    2nd instalment on or before 15th December Amount not less than 60% of such advance tax after deducting amount paid in earlier installment
    3rd instalment on or before 15th March Entire balance amount of such advance tax
  • In case of companies the first instalment is due on 15th June of the Financial Year. With effect from 01st June, 2016 the advance tax payment due dates have been standardised for both companies and assessees other than companies. So the revised schedule for payment of advance tax for individuals will be:
    Due Date of Installments Amount Payable
    1st instalment on or before 15th June Amount not less than 15% of such advance tax liability
    2nd instalment on or before 15th September Amount not less than 45% of such advance tax liability as reduced by the amount, if any paid in the earlier instalment
    3rd instalment on or before 15th December Amount not less than 75% of such advance tax as reduced by the amount, if any paid in earlier instalment
    4th instalment on or before 15th March 100% of such advance tax liability as reduced by the amount, if any paid in earlier instalment
  • This change will lead to additional tax burden on the individual taxpayers. If you have only Salary Income, you need not worry about payment of advance tax as taxes are already deducted by your employer. But in case you have incomes other than salary you may be required to pay advance tax and non-payment of the same will lead to payment of interest on the shortfall of taxes while Filing the Tax Return.
Financial Management