Understanding Advance Tax
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KEY POINTS:
- Tax payment is based on a P.A.Y.E [Pay As You Earn] model. Assessees are expected to pay their tax liability on or before March 31 of the financial year. In case of tax deduction at source, the same has to be reduced to determine the net tax liability.
- If the net tax liability after deducting the TDS, if any, is more than Rs 10000, the assessee is required to pay Advance Tax in the prescribed instalments. In case Advance Tax is not paid as per the prescribed provisions, the assessee will need to pay interest u/s 234C of the Income Tax Act, 1961.
Q 1) I have an income of about Rs 600000 under the following heads:
- Income from Business - Rs 436000
- Dividend from India Companies - Rs 24000
- Income from Interest on Bank Deposits - Rs 76000
- Income from Post Office Savings Schemes (KVP) - Rs 28000
- Income from Interest on Debentures - Rs 12000
- Income from Interest on NSCs - Rs 24000
Except for interest on bank deposits, I had no TDS. I had to pay interest for non-payment of taxes. Can you tell me about the procedure to avoid interest on such tax liability?
- Niranjan N
Tax payment is based on a P.A.Y.E [Pay As You Earn] model. Thus, it is expected that you pay your tax liability on or before March 31 of the financial year. In case you have tax deduction at source, the same has to be reduced to determine the net tax liability.
If the net tax liability after deducting the TDS, if any, is more than Rs 10000, the assessee is required to pay Advance Tax in the prescribed instalments as follows:
| Assessee | For Corporates | For Non-Corporates |
On or before June 15
of the previous year | 15 per cent of Advance Tax
payable | - |
On or before September 15
of the previous year
| 45 per cent of Advance Tax
payable
| 30 per cent of Advance Tax
payable
|
On or before December 15
of the previous year
| 75 per cent of Advance Tax
payable
| 60 per cent of Advance Tax
payable
|
On or before March 15
of the previous year
| 100 per cent of Advance Tax
payable
| 100 per cent of Advance Tax
payable
|
Any payment of Advance Tax before March 31 of that financial year shall also be treated as Advance Tax paid during the fiscal.
Thus, if you pay your Advance Tax as per the stipulated instalments, you will not have to pay any interest for non-payment or less payment. In case you do not pay as per the prescribed provisions, you need to pay interest u/s 234C of the Income Tax Act, 1961.
Q 2) I am a salaried person working in the private sector. I invest money in the National Savings Certificate Series VIII scheme every year. However, while filing my return of income, I have been declaring only Income from Salaries and have not shown my other income such as interest income. This year, my first investment of Rs 60000 will mature. Need I pay tax or is it exempt? Please advise me.
- Pradeep
You have not shown the interest accrued on the NSC Series VIII you have been purchasing every year. Therefore, you will have to declare the interest received on the said NSCs for the entire period in one year and accordingly pay the applicable income tax.
Had you declared the interest every year, the same would have been spread out over the maturity period, and you could also have claimed deduction u/s 80C of the Income Tax Act, 1961 along with other specified investments subject to a maximum of Rs 100000. Besides, you would have been required to offer only the interest earned during the current financial year on the said NSCs for tax purposes.