Do you need to to pay advance tax? Hurry up! March 15 is last date

Generally, taxes are deducted/collected at source when an income is paid. However, as all the incomes are not subjected to TDS and the tax deducted at source may be lower than the slab rate applicable, the balance tax liability has to be discharged by way of advance tax. Let us discuss the provisions of advance tax as applicable to individuals.

Who has to pay advance tax and when? 

Every taxpayer whose tax liability as reduced by the amount of TDS and TCS exceeds Rs. 10,000/- has to pay advance tax in four instalments 15th June, 15th September, 15th December and on 15th March of the financial year in the ratio of 15%, 30%, 30% and 40% respectively.  Shortfall in advance tax in any of the instalment has to be made good in the next instalment. So in case you have not paid any instalment for the current year, the entire advance tax liability can be discharged by 15th March. In respect of capital gains and dividends income, the advance tax liability in respect of such income can be discharged in instalments falling due after accrual of such income. 

For persons who are covered by presumptive scheme of taxation under Section 44AD and 44ADA have the facility to pay their advance tax by one instalment of i.e 15th March. In case you are a senior citizen and do not have any income from business or profession, you are exempted from payment of advance tax which can be paid by the due date of filing the ITR.  

Interest payable for shortfall or non-payment of advance tax

For each delay or shortfall in advance tax, you have to pay interest @ 1% per month. As the next instalment becomes due only after three months, you effectively pay interest for three months even if there is a delay of one day beyond the due date. For example, your advance tax liability is Rs. 1 lakh and have failed to fail to pay the Rs. 15,000/- due on 15th June, you will have to pay an interest of Rs. 450/- for such default even if you have paid it on 16th June. 

Any advance tax paid by 31st March of the same year is also treated as advance tax. So in case you fail to pay the advance tax instalment of 15th March, or even if you have paid the instalment on 15th March but find shortfall you can still pay it by 31st March 2022 but you will have to pay penal interest @ 1% for one month in addition to interest which you have to pay for any short fall in earlier instalments. 

What will happen if advance tax liability is not discharged by 31st March of the financial year

If you are not able to pay full advance tax, you can still pay it but under a different name of self-assessment tax with a cost. For non-payment or shortfall in payment of advance tax, you have to pay interest @ 1% for month or part of the month from 1st April of the next year till your actually pay the self assessment tax.  No such interest is payable if the short fall does not exceed  10% of your overall tax liability. This is in addition to the interest payable for non-payment of advance tax during the year.

It is important to know that in case of default or shortfall in payment of advance tax, in addition to interest @ 1% from 1st April till the date of actual payment of self-assessment tax, you may also have to pay penal interest for delay in filing of your ITR beyond the due date which is generally 31st July for salaried and most of the tax payers.  This interest is payable for the period from the due date of ITR till the actual date of fling of the return. This interest is payable even if you have already paid the self assessment tax by the due date of filing of income tax return. 

What happens if you pay more advance tax than your tax liability

In case you pay more tax, either by way of advance tax or TDS, over your actual tax liability, you can claim refund for the excess tax paid but you will have to file your ITR to get such refund. Moreover, you are entitled to get an interest at the rate of 6% p.a. on such excess tax paid.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.