Know if you are liable to pay Advance Tax by 15^th September 2021

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.

What are the due dates of payment of advance tax?

Due date for both individual and corporate taxpayers are as follows

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

For taxpayers who have opted for Presumptive Taxation Scheme under section 44AD & 44ADA – Business Income

Due Date	Advance Tax Payable
On or before 15th March	100% of advance tax

What is the amount of 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

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How much interest do you have to pay extra if you file ITR after 31^st December 2020?

An income tax return (ITR) is basically a document that is filed as per the provisions of the Income Tax Act, reporting one’s income, profits and losses and other deductions as well as details about tax refund or tax liability. The original due date for submitting ITR for assessment year 2020-2021 relevant to financial year 1^st April 2019 to 31^st March 2020 was 31^st July 2020. However, the same was extended due to pandemic COVID-19.

Extension of Due Dates due to COVID 19

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. With an ever-increasing corona virus cases, lockdown was considered as an only solution to flatten the curve. However, the measures which were implemented to avoid a human disaster, have in turn led to the birth of several issues such as unemployment, recession, hindrance to economic growth, financial instability and so on.

The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. With the ongoing COVID -19 pandemic a lot of income tax due dates were extended. One of these extension benefits were also provided to the due date of filing income tax returns.

The deadline to file ITR by individual taxpayers for FY 2019-20 ends on December 31, 2020, while the same for taxpayers whose accounts require to be audited is January 31, 2021.

Therefore, ITR due dates for FY 2019-20 are as follows:

Category of Taxpayer	Due Date
Individual	31^st December, 2020
Body of Individuals (BOI)	31^st December, 2020
Hindu Undivided Family (HUF)	31^st December, 2020
Association of Persons (AOP)	31^st December, 2020
Businesses (Requiring Audit)	31^st January, 2020
Businesses (Requiring TP Report)	31^st January, 2020

Is there any interest leviable if one files their income tax returns after the due date?

If a taxpayer fails to the file the income tax return within the prescribed time limit, he would be liable to pay interest for such default as per provisions of section 234 of the Income Tax Act.

There are 3 different interest under section 234:

Delay in filing of Tax Returns – Section 234A
Delay in payment of Advance Tax – Section 234B
Deferred Payment of Advance Tax – Section 234C

What is Interest under Section 234A?

Interest under section 234A is imposed when there’s a delay in filing income tax returns. Under this Section, interest is charged at 1 % on the outstanding tax amount and must be paid from the first day after the due date of filing the return until the date of the actual filing of the return.

For instance, Mr A has a total tax outstanding of Rs. 3,00,000 (Including net advance tax and TDS) Instead of filing her returns on July 31, she files it on January 15. He is now late by 6 months on the tax payment.

Interest liability under Section 234A = 3,00,000 * 1% * 6 = 18000

Mr A will now have to pay Rs. 18,000 after the tax amount. The interest will continue until March 31st that is the end of the assessment year.

What is Interest under Section 234B?

Interest under section 234B is imposed if taxpayers make incomplete tax payments. It is also levied in case of a delay in the payment of advance tax.

As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of “advance tax”. However, a resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.

One must pay interest under Section 234B if they are liable to pay advance tax but failed to do so. However, it is also imposed if you have paid advance tax but the amount is less than 90% of the assessed tax.

For instance, Mr B must pay a total tax of Rs. 2,00,000 for the current fiscal year. The TDS deduction amounted to Rs. 1,82,650. On March 25, Mr B paid Rs. 7,000 while the balance amount of Rs. 10,350 was paid on July 20.

Assessed tax = Total Tax – TDS

= Rs. 2,00,000 – Rs. 1,82,650

= Rs. 17,350

Mr B should have paid at least 90% of Rs. 17,350 which amounted to Rs. 15,615, on March 31. However, he only made a payment of Rs. 7,000. Hence he will have to pay an interest penalty on the assessed tax.

So, Mr B has to pay:

Rs. 15,600 (rounded figure) x 1% x 4 months (calculated till July) = Rs. 624.

Hence Mr B is liable to pay Rs. 624, as a penalty on the interest of the assessed tax, under Section 234B

What is Interest under Section 234C?

Interest under section 234C is imposed when there is a delay in payment of an instalment of advance tax. Interest is payable under Section 234C if,

Advance Tax is paid on or before 15th June is less than 12% of Assessed Tax
Advance Tax is paid on or before 15th September is less than 36% of Assessed Tax
Advance Tax is paid on or before 15th December is less than 75% of Assessed Tax
Advance Tax is paid on or before 15th March is less than 100% of Assessed Tax

The interest on late payment is calculated at 1% simple interest on the tax amount due, calculated from individual cut off dates shown above, until the date of actual payment of outstanding taxes.

Let’s refer to the table below to understand interest under Section 234C better, where for instance tax liability is Rs 1,00,000:

Payment Dates	Advance Tax payable	Total Advance Tax paid	Shortfall (Cumulative)	Penalties (Cumulative)
15th June	15,000	5,000	10,000	1% * 3 * 10,000 = 300
15th September	45,000	25,000	20,000	1% * 3 * 20,000 = 600
15th December	75,000	35,000	40,000	1% * 3 * 40,000 = 1200
15th March	1,00,000	50,000	50,000	1% * 1 * 50,000 = 500

Therefore, total interest payable is Rs 2600

It is always considered a prudent action to file one’s income tax return on time. More than any other benefit, being on the right side of law helps. It is recommended to keep the income tax department informed about one’s income and taxability. This communication is only possible when one files their ITR. Taxpayers are urged to file their ITR’s before the said due date. In doing so, one can avoid late fees, interest and the chances of having ‘best judgement assessment’ conducted on their income.

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