ADVANCE TAX & INTEREST PROVISION

INCOME TAX ACT,1961

Samuel S Kondeti

ADVANCE TAX Section 207:Advance tax is payable on the total

income (including on the income of capital gains and casual incomes )which is chargeable to tax in the A.Y immediately following that F.Y. Such income is termed as “current income”.

The Tax is Paid as income is earned This Scheme of Advance Payment of Tax is also

Called as Pay as you earn income

ADVANCE TAX CONTD.. Section 208: Tax is Paid in Advance when Tax Liability is More

than Rs.10,000. Section 209: From the income tax liability, TDS has to be

reduced and the balance shall be payable as per installments mentioned in section 211.

Section 210: It is obligatory for every person to pay advance tax according to his/her estimate without any notice from the A.O. However, the A.O is also empowered to issue a notice to any person liable to pay advance tax under Sec.210,directing him to pay tax. This notice can be sent latest by the last day of the February of the previous year.

ADVANCE TAX CONTD.. Section 211: Advance tax shall be payable as per following installments. Due Date for Advance Tax Payment

Due date of installment Amount payable Companies On or before 15/06/PY 15% of advance tax payable On or before 15/09/PY 45% of advance tax payable as reduced by any

amount already paid. On or before 15/12/PY 75% of advance tax payable as reduced by any

amount already paid. On or before 15/03/PY 100% of advance tax payable as reduced by the

amount already paid.

Other than Companies On or before 15/09/PY 30% of advance tax payable. On or before 15/12/PY 60% of advance tax payable as reduced by any

amount already paid. On or before 15/03/PY 100% of advance tax payable as reduced by the

amount already paid.

ADVANCE TAX CONTD.. Section 211B: If assessee does not pay

advance tax when he is liable to pay then he will be deemed to be assessee in default.

Consequences for non-payment of advance tax shall be

Assessee is known as assessee in default. Assessee shall be liable to pay interest under section

234C and section 234B. Assessee shall be liable to pay penalty under section

140A(3) which can be maximum of 100% of such tax.

INTEREST ON TAX LIABILITY

Payable By AssesseSection 234A Section 234BSection 234CSection 234D

Section 220(2)Section 201(1A)

Receivable by Assesse

Section 244A

INTEREST U/S201(1A) 1. INTEREST U/S 201(1A) If the person responsible for deducting

tax at source does not deduct tax at source, wholly or partly, under section 192 to 196C or after deducting tax fails to pay the same as required by Act, he is liable to pay interest. Interest is calculated at the rate of 12% per annum { w.e.f. 1/04/2008 at the rate of 1% per month or part of the month } on the amount of such tax from the date on which such tax was deductible to the date on which the tax is actually paid.

INTEREST U/S220(2) If any assessee fails to pay any tax

( other than advance tax) specified in a demand notice within 30 days of the service of notice of demand, he is liable to pay interest at the rate of 1% per month or part of month from the expiry of 30 days of the service of notice of demand.

SECTION 234AFor Delay or Failure in Furnishing The Return Interest at 1% on Tax Liability For Calculation of Interest Part of Month is Taken as a Month Period of Interest Payable

In case of Companies or Assessee covered under Tax Audit From 1st October of the Assessment year to the Date of Furnishing the return of Income In case of any other Assessee From 1st August of the Assessment year to the Date of Furnishing the return of Income

SECTION 234B Rate of Interest : 1% per month of part of month When payable : 1) Failed to pay advance tax or 2) paid advance tax is less than 90% of assessed tax ( Assessed tax = Tax on Income u/s 143(1) or u/s

143(3) – TDS paid ) { If interest under section 234B is to be calculated for

the purpose of self assessment under section 140A , then “assessed tax” means tax on returned income – TDS paid }

Amount on which interest is payable : 1) Assessed Tax or 2) Assessed tax minus advance tax paid Period for which interest is payable : From 01st April of the A.Y. to the date of determination of

Income u/s 143(1) or where regular assessment is made to the date of regular assessment

SECTION 234B CONTD .. 

Adjustment when tax is paid before regular assessment under section 140A : If before the determination of total income u/s 143(1) or completion of a regular

assessment tax is paid on the basis of self–assessment, the interest shall be calculated as under :

a) up to the date of payment of tax u/s 140A, interest will be calculated as mentioned above { i.e. (Tax determined – TDS/TCS-Advance tax) X ( Period w.e.f. 1st April of A.Y. to the date of payment of tax u/s 140A) X 1%}

  b) from the date of payment of tax u/s 140A, interest will be calculated on the

amount by which advance tax and tax paid u/s 140A falls short of assessed tax. { i.e. [Tax determined – TDS/TCS-Advance tax- (tax paid u/s 140A – Interest chargeable u/s 234A, 234C and 234B {as calculated in clause (a) above})] X ( Period w.e.f. date of payment of tax u/s 140A to the date of assessment u/s 143(1) or regular assessment) X 1%}

  If as a result of an order under section 154, 155, 250, 254, 262, 263, 264 and

245D, the interest payable is increased or reduced, as the case may be, the interest shall be increased/ reduced accordingly.

SECTION 234CIN CASE OF A NON CORPRATE ASSESSEInterest is Payable

Interest Rate Liable Tax Amount

Period

If Advance Tax is paid on or before September 15 is Less than 30%

If Advance Tax is paid on or before December 15 is Less than 60%

If Advance Tax is paid on or before March 15 is Less than 100%

1% for every month or Part of Month

1% for every month or Part of Month

1% for every month or Part of Month

30% on Tax Amount Minus Advance Tax Paid

60% on Tax Amount Minus Advance Tax Paid

Tax Amount Minus Advance Tax Paid

3 Months

3 Months

Nil

SECTION 234CIN CASE OF A CORPRATE ASSESSEInterest is Payable

Interest Rate Liable Tax Amount

Period

If Advance Tax is paid on or before June 15 is Less than 15%

If Advance Tax is paid on or before September 15 is Less than 45%

If Advance Tax is paid on or before December 15 is Less than 75%

If Advance Tax is paid on or before March 15 is Less than 100%

1% for every month or Part of Month

1% for every month or Part of Month

1% for every month or Part of Month

1% for every month or Part of Month

15% on Tax Amount Minus Advance Tax Paid

45% on Tax Amount Minus Advance Tax Paid

75% on Tax Amount Minus Advance Tax Paid

Tax Amount Minus Advance Tax Paid

3 Months

3 Months

3 Months

Nil

SECTION 234DWhere the amount refund Granted to Assessee exceeds the amount refundable on regular assessment or Where the refund granted is not due on regular assessment, Interest at 0.5% for every Month, a part of Month is also consider as a Month, Period is from Date of grant of refund to the date of such regular assessment.

SECTION 244A Interest is payable where any refund arises due to

any excess payment of tax.   Rate of Interest : 0.5% per month or part of

month Period : 1. Where the refund is due to excess

payment of advance tax/TDS/TCS/advance fringe benefit tax, interest is calculated from the 1st day of A.Y. to the date of grant of refund ( i.e. the date of signing of the refund order ).

2. Where the refund is due to excess payment of self assessment tax, interest is calculated from the date of assessment order to the date of grant of refund ( i.e. the date of signing of the refund order ).

SECTION 244A CONTD.. The assessee is not entitled for interest u/s 244A on excess

payment of advance tax/TDS/TCS/advance fringe benefit tax is payable if excess payment is less than 10% of the tax determined.

If the proceedings ( resulting in the refund) are delayed for reasons attributable to the assessee, the period of the delay so attributable to him shall be excluded from the period for which interest is payable.

If as a result of an order under section 154, 155, 250, 254, 262, 263, 264 and 245D, the amount on which interest was has been payable is increased/reduced, as the case may be, the interest shall be increased/ reduced accordingly.

If the interest is reduced, the Assessing officer will send a notice of demand in the prescribed form specifying the amount of excess interest paid and requiring him to pay such amount.

THANK YOU

skondeti@rediffmail.com

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