Know if you are liable to Pay Advance Tax before 15 March

Every individual has certain responsibilities under different laws and when it comes to the Income Tax Act. One of the primary responsibilities is to pay the required tax on the income earned during the year. There are various ways in which the tax will be paid and this covers self-assessment tax, tax deducted at source, advance tax and tax on assessment. Advance tax is the tax that is paid in advance for the income of a particular financial year. The normal expectation is that tax has to be paid only when the income is earned but under the tax provisions the tax payer has to actually estimate the income for the entire year and based on this pay advance tax at specific time intervals.

When shall a person be liable to pay advance tax?

A Person Shall be liable to pay advance tax only if Tax Liability exceeds Rs. 10,000 i.e., a person shall be exempt from payment of Advance Tax If Tax Liability does not exceed Rs. 10,000.
The Education Cess and Secondary Higher Education cess shall also be considered for the purpose of calculating the Tax Liability.
A Senior Citizen who does not have Income under head Business or Profession shall be exempt from the Payment of Advance Tax.
Taxpayers opting for the presumptive taxation scheme of section 44AD are also liable to pay advance tax in respect of business covered under section 44AD.

What are the due dates of payment of advance tax?

Due Date	Advance Tax Payable
On or before 15th June	15% of advance tax
On or before 15th September	45% of advance tax less advance tax already paid
On or before 15th December	75% of advance tax less advance tax already paid
On or before 15th March	100% of advance tax less advance tax already paid

Therefore, by 15^th March, 2021, taxpayers are liable to pay minimum 100% of advance tax in a single instalment.

Interest on default in paying advance tax

Interest under section 234B is applicable when:

Tax liability after reducing TDS for the financial year is more than Rs 10,000 and one does not pay any advance tax.

One has paid advance tax, but advance tax paid is less than 90% of ‘assessed tax’.

In any one of the above cases, interest under section 234B shall be applicable. Interest is calculated @ 1% on Assessed Tax less Advance Tax. Part of a month is rounded off to a full month. The amount on which interest is calculated is also rounded off in such a way that any fraction of a hundred is ignored.

Interest under section 234C is applicable when:

The interest for late payment is set at 1% on the amount of tax due. It is calculated from the individual cut off dates, till the date of actual payment of outstanding taxes. Computation of interest under Section 234C is as follows:

	Rate of Interest	Period of Interest	Amount on which interest is calculated
If Advance Tax paid on or before June 15 is less than 15% of the Amount	Simple interest @1% per month	3 months	15% of Amount (-) tax already deposited before June 15
If Advance Tax paid on or before September 15 is less than 45% of the Amount	Simple interest @1% per month	3 months	45% of Amount (-) tax already deposited before September 15
If Advance Tax paid on or before December 15 is less than 75% of the Amount	Simple interest @1% per month	3 months	75% of Amount (-) tax already deposited before December 15
If Advance Tax paid on or before March 15 is less than 100% of the Amount	Simple interest @1% per month		100% of Amount (-) tax already deposited before March 15

How can advance tax be paid?

Advance tax can be paid online as well as offline.

To Pay online:

Step 1 – Login to the income tax website www.incometaxindia.com

Step 2 – Click on e-payment of Taxes tab

Step 3 – Now under the Service tab, select e-payment option

Step 4 – To pay advance tax, select Challan 280

Step 5 – Fill in the required details

Step 6 – Choose Net banking option to pay online

Step 7 – After successful payment, a challan certificate will be displayed which will contain the information number, payment details and bank name via which e-payment was made. This certificate is proof of the payment that has been done

To Pay Offline:

You have to visit the designated bank branch and fill the challan form and then pay the taxes

The tax department had been issuing notices to the defaulting taxpayers and also seeming to take strict actions against them. The income tax department will be levying a hefty penalty on all the defaulters in case they don’t pay the taxes on time. The due date for the deposition of advance tax is 15th March and the same is fast approaching. Taxpayers are now seeking CA help to check out the tax liability on them. If in case the taxpayer misses the deadline, he may have to shell out the hefty penalty on the missing deadline.

Click below to know stepwise process to pay Advance Tax online

Stepwise process to pay Advance Tax online on or before 15th March 2021

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From which Assessment Year interest leviable u/s 234B in Income Tax?

Advance tax is the tax that is paid in advance for the income of a particular financial year. The normal expectation is that tax has to be paid only when the income is earned but under the tax provisions the tax payer has to actually estimate the income for the entire year and based on this pay advance tax at specific time intervals. A person shall be liable to pay advance tax only if Tax Liability exceeds Rs. 10,000 i.e., a person shall be exempt from payment of advance tax If tax liability does not exceed Rs. 10,000.

Interest on default in paying advance tax

Interest under section 234B is applicable when:

Tax liability after reducing TDS for the financial year is more than Rs 10,000 and one does not pay any advance tax.

One has paid advance tax, but advance tax paid is less than 90% of ‘assessed tax’. In any one of the above cases, interest under section 234B shall be applicable. Interest is calculated @ 1% on Assessed Tax less Advance Tax. Part of a month is rounded off to a full month. The amount on which interest is calculated is also rounded off in such a way that any fraction of a hundred is ignored.

Let us refer to the case of M/s Huawei Technologies Co. Ltd (ITAT Delhi), which pertained to the applicability of interest u/s 234B.

Facts of the Case:

Appellant was a company incorporated in People’s Republic of China and was primarily engaged in the business of supplying (on offshore basis) non-terminal products, i.e., advanced tele-communication network equipment, namely, core and access network equipment, mobile network equipment and data communications equipment etc. for use in fixed and mobile phone networks and terminal products, that is, mobile phone handsets to various customers (including customers in India).
As alleged, the said supplies were made on principal-to-principal basis and property in equipment was transferred to Indian customers outside India.
The appellant company, Huawei China (HC) had subsidiary in India, namely, Huawei Telecommunications India Company Private Ltd. (HI).
The issue raised was in respect of charging of interest under section 234B of the Act.

Observations of ITAT

As per the provisions of section 234B of the Act, an assessee who is liable to pay advance tax under section 208 will be liable to interest under section 234B of the Act, if he fails to pay such tax, or the advance tax paid by him falls short of 90% of the assessed tax.
In ITAT’s understanding of the law, an assessee must first be liable to pay advance tax under the provisions of section 208 of the Act.
As per the provisions of section 208 read with section 209(1)(d) of the Act, advance tax payable has to be computed after reducing from the estimated tax liability the amount of tax deductible/ collectible at source on income which is included in computing the estimated tax liability
Under section 195 of the Act, tax is deductible at source from payments made to non-residents.
Appellant was a non-resident and thus, tax was deductible at source from the payments made to it under section 195 of the Act.

Since tax was deductible at source on all the payments made to Appellant, no advance tax was payable as per the provisions of the Act
The Delhi High Court in the case of DIT v. GE Packaged Power Inc wherein the High Court held that no interest under section 234B of the Act could be levied on the assessee-payee on the ground of non-payment of advance tax because the obligation was upon the payer to deduct the tax at source before making remittances to them.
Amendment to the provisions were brought by the Finance Act, 2012, w.e.f. 1.4.2012 by which a proviso below section 209(1)(d) of the Act was added but applicable from A.Y 2013-14.

Therefore, ITAT directed the Assessing Officer not to charge interest u/s 234B of the Act upto A.Y 2012-13. Interest could be levied as per provisions of law from A.Y 2013-14 onwards

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