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2019

FAQs On Advance Tax

FAQ On Advance Tax

Q. Who is liable to pay Advance tax?

As per Section 208 of the Income Tax Act, Every person (individual, firm, company, etc.) whose estimated tax liability for the year (i.e., for the year in progress such as FY 2016-17, FY 2017-18,  etc.) after TDS (i.e., TDS which is deducted for the person by its payers/clients/banks, etc.) is Rs. 10,000 or more shall pay its tax for the year in advance during the same financial year.

Q. Such tax shall be paid in installments as on due dates specified in the act:

Ans: Individuals, having only salary income are not required to pay advance tax as the liability to deduct and deposit tax is on the employer making such payment in the form of TDS. However, they must ensure that TDS deducted by an employer is adequate as per their tax liability.

Q. Whether a taxpayer opting for Presumptive Taxation u/s 44AD or 44ADA is liable to pay advance tax?

Ans: Yes, from the A.Y 2017-18, an assessee who opts for the presumptive taxation scheme under section 44AD and section 44ADA is required to pay advance tax related to such business. However, the advance tax can be paid during the financial year (immediately proceeding to the assessment year) on or before March 15.

Q. When Assessing Officer is liable to determine the Advance tax liability?

Ans: If a taxpayer who has a legal obligation to pay advance tax fails to make payment for advance tax or advance tax is lower than the correct amount, AO may pass an order asking the taxpayer to pay tax on assessee’s current year income. Such order shall clearly specify the amount payable and in the number of installments, the same needs to be paid.

Such order should be passed anytime during the previous year but before 1st March, i.e., by 28th February.

Assessing Officer can serve an order requiring the assessed to pay advance tax if he is of the opinion that such person is liable to pay advance tax or the tax paid is lower.

In such cases, the Officer will take the higher of following incomes and calculate the tax as per the prevailing rate of income-tax:-

(a)The total income of the latest previous year in respect of which Officer has assessed income, i.e., the year for which an assessment has been completed by the Income-tax Officer;
or
(b)   The total income declared by the assessed in any return after the year of assessment by an officer., i.e., Any income furnished by the assessee in Income-tax return for any previous year after;

 Q. Which tax rates are to be used for computing advance tax liability?

Ans: For computing, the advance tax liability of the prevailing tax rates or the rates in force of the previous year for which the advance tax is to be computed are to be used.

Q. What is the treatment of Advance Tax in the books of accounts?
Ans: 

  • Advance Tax is considered to be an asset and not an expense. It can be adjusted against one’s tax liabilities at the time of finalization of the Balance Sheet.
  • It is shown under Loans and Advances in the Balance Sheet.

Q. Who is not required to pay Advance tax?

Ans: A resident senior citizen not having any income from business or profession is not liable to pay advance tax.

Q. What are the due dates for payment of advance tax?

Ans: The Advance Tax must be paid in four equal installments on or before the following dates:

Installment Due Date
1st Installment 15th June
2nd Installment 15th September
3rd Installment

15th December

4th Installment 15th March

Q. How much tax must be paid in each installment of advance tax?

Ans: The amount of Advance tax to be paid in each installment must not be less than prescribed in the following table:

Installments Amount of Advanced Tax
1st Installment Not less than 15% of advance tax liability.
2nd Installment Not less than 45% of advance tax liability as reduced by the amount, if any, paid in the earlier installment.
3rd Installment Not less than 75% of advance tax liability, as reduced by the amount(s) if any, paid in the earlier installment (s).
4th Installment The whole amount of advance tax liability as reduced by the amount(s) if any, paid in the earlier installment (s).

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