As we move closer to end of the financial year, it is mandatory for us to check and ensure that all the due taxes on the incomes earned amid the year are paid. Advance tax is paid on the standard of “pay as you acquire” and is payable within the same financial year in which the income is earned. Distribution of the Income-Tax Act, 1961 gives the recommended due dates to advance tax payment which is payable in installments.
An individual is at risk to pay advance tax up to 15% of it payable on and or before half month of June, up to 45% on and or before half month of September, up to 75% on and or before half month of December, and up to 100% on and or before March 15 of the financial year.
How is advance tax calculated?
The advance tax payable is figured on the evaluated income of the person for that financial year. A wage like capital increases, interests, profits, pay from running business or rewards from lottery etc is considered while deciding the estimated wage to compute the advance tax liability.
According to the provisions of the Income-Tax Act, the advance tax becomes payable when the total income tax payable by a person in a financial year is probably going to be Rs 10,000 or more. Further, while registering the advance tax obligation, wages deducted at source and help asserted under area 90/91 of the Act must be reduced from the total tax liability and the adjust taxes are to be released as advance tax.
In such a case, taxes on the pay wage should be deducted by the employer as a part of TDS. Part of taxes on interest income should be deducted by the payer as TDS. Advance tax should be calculated on business income, interest income and should be paid in installments.
Accordingly, advance tax payment applies to all citizens — salaried, consultants, and specialists. It is, however, relevant to take note of that a resident senior citizen, matured 60 years or more, having income from any source other than salary from profession/business is exempted to release the taxes payable through the advance tax system. Thus, such people can pay taxes at the season of filing the tax return.
When is interest payable?
An individual is at risk to pay interest in a case he defaults in paying advance tax or has broken to deposit advance tax. If 90% of the advance tax due isn’t paid inside the recommended due date, 1% interest is charged for non-installment of advance tax payment for every month till taxes are paid. Further, intrigue is interest exacted for the conceded installment of advance tax @1% of every month. It is important to take note of that interest isn’t levied for any shortage in the installment of advance tax by an account of failure to assess income from capital gains.
It should be noticed that if an individual has even paid 12% and 36% of the taxes payable by 15th June and 15th September, properly, there would not be any interest payable under a deferment of installment of advance tax.
We are moving toward the due date, i.e. March 15, for an installment of the last advance tax payment for the year ending March 31, 2018, similar should be released on time to be a tax agreeable citizen as well as to avoid interest outcomes.