DYK: Last instalment of advance tax for this financial year is due on 15 March
Advance tax refers to paying taxes as and when you earn or paying taxes in accordance with the income flow, rather than waiting till the end of the relevant financial year
In Budget 2016-17, finance minister Arun Jaitley proposed changes in the schedule of advance tax instalment payments. If the proposed changes are accepted, from the next financial year (FY), an individual income tax assessee will have four advance tax instalment dates, instead of three at present.
Advance tax refers to paying taxes as and when you earn or paying taxes in accordance with the income flow, rather than waiting till the end of the relevant FY. According to section 208 of the Income-tax Act, 1961, every individual tax assessee whose estimated tax liability for an FY exceeds Rs.10,000, has to pay advance tax.
CHANGE IN INSTALMENTS
As per prevailing income tax rules, advance tax has to be paid in three instalments as on or before the due dates prescribed by the tax department. The first instalment becomes due on or before 15 September of the relevant FY. A tax payer has to deposit 30% of estimated income tax in form of advance tax in the first instalment. The second instalment gets due on or before 15 December and 60% of estimated tax should be deposited. The remaining estimated tax has to be paid by the third instalment, which is on or before 15 March.
As proposed in the Budget, one will have to pay 15% of income tax by 15 June of the relevant FY, 45% by 15 September, 75% by 15 December and the rest by 15 March.
If any amount is paid by way of advance tax on or before 31 March, then that will also be treated as advance tax for that FY.
THINGS TO KNOW
If advance tax is not paid as stipulated, one may be charged interest penalty under section 234B and section 234C of the Act on the due taxes. However, after making payment of the first two instalments, an income tax assessee is allowed to make adjustments in the last instalment, depending on any increase or decrease in the estimated income and tax thereon.
Besides that, according to section 207 of the Act, a resident senior citizen (an individual of 60 years or above) not having any income from business or profession is not liable to pay advance tax. For instance, if a senior citizen is earning rental income, receiving pension, earning interest from bank deposits, and dividends, in such cases, she need not bother about advance tax liability, as these incomes do not fall under the head of “income from business or profession”. Such exemption is irrespective of the amount of income that a senior citizen is earning from a source other than business or profession.
The last instalment of advance tax for the ongoing FY is due on 15 March. Make sure you pay on time.