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Advance Tax Payment (Section 207 to 211 & 214 to 234E)


advance tax

Contents :
  1. Meaning of Advance Tax 
  2. Sections 207 to 211.
  3. Sections 214 to 234E.
  4. Advance Tax (Section 208, 209 and 211).
  5. Mode of Payment of Advance Tax. 
  6. When Assessee Deemed to be in Default.
  7. Penalty in Case of Shortfall of Advance Tax Payment.
  8. Verification Status of Advance Tax Payment.
  9. Interest for Deferment of Advance Tax.
Q. What is advance tax? Explain its computation and liability for payment of advance tax u/s 207 and 208.
Q. Describe the payment of advance tax in pursuance of an order of the assessing officer. Also discuss the mode of payment of tax.
Q. Explain the sections 211, 217 and 219 under the advance tax payment.
Q: Discuss the provisions regarding the payment of Advance Tax under
Income Tax Act 1961.
Q: Write short note on Advance Payment of Income Tax.

Meaning of Advance Tax :

Tax is a major source of fund for any Government in the world. In India as per general provision of the Income Tax Act, 1961 every person whose income is exceeds threshold exemption limit is liable to pay income tax. However for speedy and efficient tax collection a mechanism is developed by government in the form Advance Tax.
Advance tax is a payment mechanism in which tax is deposited by assessee in installment instead of entire amount deposited at the end of financial year. For assessee's point of view advance tax is helpful for fund management as the tax liability is divided in installments. Advance tax is payable on current income in installments during the previous year.
The advance payment of tax is part of collection and recovery of tax. The procedure of calculation and payment of advance tax is provided in Section 207 to 219 which are discussed in a brief. Under the scheme of advance tax payment of tax, an assessee is required to pay tax during the course of earning of income in the previous year, though such income is chargeable to tax during the assessment year.
In short, income earned during the financial year(Previous year) 2009-10 shall be charged to tax in assessment year 2010-11. But the assessee is required to pay tax, in advance on the taxable income of financial year 2009-10 during the financial year 2009-10 itself.

Following are the Sections of the Income Tax Act, 1961. Which Deal with the Provisions of Advance Tax :
Section 207: Liability for payment of advance tax.
Section 208: Conditions of liability to pay advance tax.
Section 209: Computation of advance tax.
Section 210: Payment of advance tax by the assessee of his own accord or in pursuance of order of Assessing Officer.
Section 211: Installments of advance tax and due dates.

Section 207 : Liability for Payment of Advance Tax  :
Section 207 has been amended from the financial year 2012-13 to provide that advance tax will not be payable in the case of a senior citizen, if following conditions are satisfied :
1. The tax payer is an individual
2. He is resident India
3. He is at least 60 years of age at any time during the previous year (for the financial year 2012-13,this condition can be satisfied in the case of an individual who was born before April 1953.
4. He does not have any income chargeable under the head" Profit and gains of business or profession".
If the above conditions are satisfied, the concerned individual will not be required to pay advance tax during the financial year. Such an individual can pay tax under section 140A at the time of submission of return of income.

An assessec is liable for payment of advance tax in accordance with provisions of section 208 to 219 in respect of total income of that financial year.
I order to reduce the compliance burden on senior citizens exemption from payment of advance tax Section 207 has been amended to provide that resident individual in the following case advance tax need not be deposited :
  1. Where entire tax liability is covered by TDS deducted then in this situation advance tax is not applicable.
  2. Resident individuals who are over 60 years of age and do not have income chargeable under the head "Profits and Gains of Business or Profession" are not required to pay advance tax. Further no advance tax is payable in case of assessees covered under section 44AD of the Act.
Section 208 : Conditions of Liability for Payment of Advance Tax :
Every person including salaried employees and pensioners, whose TAX payable exceeding Rs.10,000/- or more w.e.f.1/4/2009) during the financial year are required to pay advance tax.
The persons who have received order u/s 210(3) if Form no 28 from the Assessing Officer, shall pay the advance tax in the installments as specified in the order. The amount specified in such order, the advance tax to be paid with such higher estimate (section 210(3) & (4)). The notice of demand should specify the amount of advance tax and the installments in which such advance tax to be paid.

As per section 208, advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee is ten thousand rupees or more. Thus, provision of advance tax is applicable on all assessee whose tax liability comes more than Rs.10,000/-.

Section 209 : Computation of Advance tax :
Section 209 has been amended with effect from 1st July 2012 to provide that where a person has received any income without deduction or collection of tax,he shall be liable to pay advance tax in respect of such income.(will be applicable for the financial year 2012-13 and the subsequent financial years.
The person liable to pay advance tax in installments by the due date mentioned as under :

Where the assessee has to pay advance tax in his own motion (means not by order of assessing officer) - The assessee has to first estimate his total income and then compute tax on such income considering rates applicable to that financial year. Such tax is the advance tax.

1) Where the assessee is required to pay advance tax on order of assessing officer by virtue of section 210(3) - Higher of the following is taken as the total income :
i) The total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment.
ii) The total income returned by the assessee in any return of income furnished by him for any subsequent previous year.
iii) The tax calculated using applicable tax rates is taken as advance tax.

2) Where the Assessing Officer amended his order u/s 210(4) - Total income declared in such retun or assessed in such regular assessment, as the case may be is taken as total income and tax is calculated using applicable tax rates.

3) If there is any amount of TDS deductible or TCS collectible from assessee then such TDS or TCS is to be reduced from the amount of such advance tax. Provided that the income from which TDS or TCS is to be made is included in the current income or total income from which advance tax is calculated. (If the person responsible for deducting or collecting tax does not do so, then such TDS or TCS is not deductible for calculating advance tax.)

Section 210 : Payment of Advance Tax in Pursuance of an Order of the Assessing Officer :

If taxpayer fails to pay advance tax (or advance tax paid is lower than the required amount) and he has already
been assessed by way of regular assessment in respect of the total income of any previous year, then the Assessing Officer may pass an order under section 210(3) requiring him to pay advance tax on his current year's income (specifying the amount of installments in which tax should be paid). Such an order may be passed during the financial year, but not later than the last day of February.

On receipt of the notice from the Assessing Officer to pay advance tax, if the taxpayer's estimate is lower than the estimate of the Assessing Officer, then the taxpayer can submit his own estimate of current income/advance tax and pay tax accordingly. In such a case, he has to send intimation in Form No. 28A to the Assessing Officer.

Alternatively, if the advance tax on current income as per own estimate of the taxpayer is likely to be higher than the amount estimated by the Assessing Officer, the taxpayer shall pay such higher amount as advance tax in accordance with his own calculation. In such a case, no intimation to the Assessing Officer is required. The Assessing Officer can revise his order issued to the taxpayer to pay advance tax (as discussed above) under section 210(4). Such revision can be done, if subsequent to the passing of an order to pay advance tax but before 1st March of the relevant financial year a return of income in respect of any later year has been furnished by the taxpayer or any assessment for any later year has been completed at a higher figure. On receipt of such order, the procedure to be followed by the taxpayer will be same as discussed earlier.

Section 211 : Installment of Advance Tax and Due Dates :

Advance Tax provisions has been amended by the Finance Act 2016 (No. 28 of 2016) which is effective from 01-06-2016 for Assessment Year 2017-18.
Following are major amendments related to Advance Tax Liability for A.Y. 2017-18 :

1) Section 211(1) is amended to provide that advance tax will be paid in four installments of 15%, 45%, 75% and 100% of tax payable on the current income by 15th June, 15th September, 15th December and 15th March, respectively in case of all assesses. Earlier up to A.Y. 2016-17 the assessee other than corporate assessee paid Advance Tax in three Installment. Now all assessee except assessee covered w/s 44AD is treated at par for Advance Tax provisions.

2) Assessees covered u/s 44AD are to pay advance tax of the whole amount in one installment on or before the 15th March of the financial year consequent upon raising of the turnover limit from 1 crore to 2 crore.

Section 211 /section 115WI

Due Date

Non Company Assesses

For Company Assesses

By 15th June

Nil

15% of advance tax

By 15th September

30% of advance tax

45% of advance tax payable less amount already paid

By 15th December

60% of advance tax payable less amount already paid

75% of advance tax payable less amount already paid

By 15th March

100% of advance tax payable less amount already paid

100% of advance tax payable less amount already paid

By 31st March

Any amount of tax paid on or before 31st March shall be treated as Advance Tax paid during the financial year ending on that day

Any amount of tax paid on or before 31st March shall be treated as Advance Tax paid during the financial year ending on that day

 If the last day for payment of any installments of Advance Tax is a day on which the received bank is closed, the assessee can make the payment on the next immediately following working day and in such cases, the interest on the tax amount u/s 234B and 234C is not levied.

Advance tax installments should be deposited along with Challan No 280 in the Government Treasury (RBI) or any of the authorized branches of Nationalized
Banks.

Section 214: Interest payable by Government :
The Central Government shall pay simple interest at 15% p.a. on the amount by which the aggregate sum of any installment of advance tax paid during any financial year in which they are payable under sect.207 to 213 exceeds the amount of the advance tax from 1st April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year.
It is provided that in respect of any amount refunded on a provisional assessment under section 141A, no interest shall be paid for any period after the date of such provisional assessment.

Section 215: Interest payable by assessee :
Where, in any financial year, an assessee has paid advance on the basis of his own estimate and the advance tax paid less than 75% of the assessed tax, simple rate of interest @ 15%p.a. from 1st April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year.

Section 216: Interest payable by assessee in case of under-estimate etc. :
On making the regular assessment, the Assessing Officer finds that any assessee has under estimated the advance tax payable by him, he may direct that the assessee shall pay simple interest at 15% p.a.

Section 217:Interest payable by assessee when no estimate made :
On making the regular assessment, the Assessing Officer finds that any assessee has not sent the statement or the estimate in lieu of statement, he may direct that the assessee shall pay simple interest at 15% p.a.

A) Where, on making the regular assessment, the Assessing Officer finds :
  1. That any such person as is referred to in clause (a) of sub-section (1) of Section 209A has not sent the statement referred to in that clause or the estimate in lieu of such statement referred to in sub-section (2) of that section.
  2. That any such person as is referred to in clause (b) of sub-section (1) of Section 209A has not sent the estimate referred to in that clause, simple interest at the rate of fifteen per cent per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said sub-section (1) or sub-section (2) upto the date of the regular assessment shall be payable by the assessee upon the amount equal to the assessed tax as defined in sub-section (5) of Section 215.
Where, on making the regular assessment, the Assessing Officer finds that any person who is required to send an estimate under sub-section (4) of Section 209A or any such person as is referred to in sub-section (3A) of section 212 has not sent the estimate referred to therein, simple interest at the rate of fifteen per cent per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said sub-section (4) or, as the case may be, sub-section (3A) up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax paid by him falls short of the assessed tax as defined in sub-section (5) of Section 215.

B) The provisions of sub-sections (2), (3) and (4) of Section 215 shall apply to interest payable under this section as they apply to interest payable under that section.

Section 218: Assessee deemed to be in default :
If any assessee does not pay on the date specified in section 211, any installment of the advance tax that he is required to pay by an order of the Assessing Officer under section 210 and does not, on or before the date on which any such installment as is not paid becomes due, send to the Assessing Officer an intimation under section 210(5) or 210(6), he shall be deemed to be an assessee in default in respect of such installment/s.

Section 219: Credit of advance tax :
Any sum, other than penalty and interest, paid by or recovered from the assessee as advance tax in pursuance of this chapter shall be treated as a payment of tax in respect of the income of the period which would be the previous year from an assessment for the assessment year next following the financial year in which it was payable and credit therefore shall be given to the assessee in the regular assessment.

Collection and recovery of tax: section 220 to 232

Section 220: When tax payable and when assessee deemed in default :
Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand u/s 156 shall be paid within 30 days of the service of the notice at the place and to the person specified in the notice.

Section 221:Penalty payable when tax in default :
When the assessee in default in making payment of tax, the assessing officer may direct to the assessee to pay the amount by way of penalty which should not exceed the amount of tax in arrears.

Section 222: Certificate to Tax Recovery officer :
When the assesses in default, the Tax Recovery Officer may draw up under signature of statement in the prescribed form specifying the amount of arrears due from the assesse (referred as Certificate) and shall proceed to recover from the assessee in the manner of following modes:
a. Attachment and sale of the assessee's movable property
b. Attachment and sale of the assessee's immovable property
C. Arrest of the assessee and his detention in prison
d. Appointing a receiver for the management of the assessee's movable and immovable property.

Section 223: Tax Recovery Officer by whom recovery is to be effected :
The Tax Recovery Officer competent to take action within the jurisdiction where the assessee carries on his business or principal place of his business.

Section 224: Validity of certificate and cancellation or amendment thereof :
It shall not be open to the assessee to dispute the correctness of any certificate drawn up by the Tax Recovery Officer on any ground whatsoever or to correct any clerical or arithmetical mistake.

Section 225: Stay of proceedings in pursuance of certificate and amendment or cancellation thereof :
The Tax Recovery Officer may grant time for the payment of tax and shall stay the proceedings for the recovery of tax. until the expiry of the time so granted.

Section 226: Other modes of recovery :
The other modes of recovery, we have discussed in section 222.

Section 227: Recovery through State Government :
If the recovery of tax in any area has been entrusted to a State Government under Clause (2)of Article 258 of the Constitution, the State Government may direct, with respect to that area or any part there of, that tax shall be recovered therein with and as an addition to, any-municipal tax or local rate, by the same person and in the same manner as the municipal tax or local tax recovered.

Section 228: Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1.4.1989

Section 228A: Recovery of tax in pursuance of agreements with foreign countries :
where an agreement in entered in to by the Central Government and other country for recovery of tax of any person whose property in India, the Recovery officer shall recover the amount specified in certificate in manner provided by Income Tax Act.

Section 229: Recovery of penalties, fine, interest and other sums :
Any sum imposed by way of interest, fine, penalty, or any other sum payable under the provisions of this Act, shall be recoverable in the manner provided in this for the recovery of arrears of tax.

Section 230: Tax Clearance Certificate Before Departure From India :
W.e.f 1.6.2003, the requirement of obtaining Tax Clearance Certificate by the person has been relaxed as under:

1. A person not domiciled in India, who has come to India in connection with business, profession or employment is required to obtain a no - objection certificate in Form 30 B from the prescribed Authority. A foreign tourist is not required to obtain NOC.

2. A person domicile in India shall furnish the following details to prescribed Authority.
a. Permanent Account Number
b. The purpose of his visit
c. The estimated period of his stay
The application to be made in Form no 31 to the prescribed authority.

Section 230A: Omitted by the Finance Act, 2001 w.e.f. 1.6.2001

Section 231: 
Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1.4.1989.

Section 232 : Recovery by suit or under other law not affected :
The several modes of recovery specified in this chapter shall not affect in any way any other law for the time being.

Section 233 : 
Omitted by the Taxation Laws (Amendment) Act, 1987 w.e.f.  1.4.1989.

Section 234 : 
Omitted by the Direct Tax Laws (Amendment) Act 1987, w.e.f. 1.4.1989.

Interest Chargeable In Certain Cases
The sections 234 A to 234 D regarding the interest chargeable for different type of defaults.

Section 234A: Interest for default in furnishing return of income :
Simple interest is payable on the amount of tax assessed as reduced by the amount of advance tax paid. TDS/TCS, DOUBLE TAXATION RELIEF U/S 90,90a, OR 91 and tax credit for MAT @ 196 for every month of delay infilling the return or where no return has been filed up to the date of completion of the assessment.

Section 234B: Interest for default in payment of Advance Tax :
Where the short payment of the Advance Tax by more than 10% or failure to pay the advance tax, interest shall be payable on the amount of shortfall @ 1% for every month from 1 April of the assessment year to the date of determination of total income u/s 143 (1) or to the date of regular assessment.

Section 234C: Interest for deferment of advance tax :
Advance tax is said to be have been deferred if any of the installments are not paid than the specified amount, the simple interest shall be payable.

Section 234D: Interest on excess refund :
Where refund has been granted to an assessee under summery assessment u/s 143(1) and subsequently on regular assessment there is no refund due or the amount refunded exceeds the amount refundable, the assessee shall be liable to pay interest on the amount so excess refunded @ 0.5% from the date of refund to the date of regular assessment.

Section 234E: Fee for default in furnishing quarterly returns :
Section 234E has been inserted with effect from 1 July 2012. Under this section, if person fails to deliver a quarterly TDS/TCS return within the time prescribed in section 200(3) or the proviso to section 206C (30, he shall be liable to pay, by way of fee, a sum of Rs 200 for every day during which the failure continues.

Based on Above Amendments the Advance Tax Related Provisions under Income Tax Law are as mentioned below :

Advance Tax (Section 208, 209 and 211) :
Advance tax is payable on all income during the financial year in every case where the amount of such tax payable by an assessee during that year is 10,000 or more.

Following chart showing Advance Tax Liability for the A.Y. 2017-18 :

Due Date

Advance Tax Liability for All Assessee (other than   Covered under Section 44AD of the I.T. Act 1961)

Advance Tax Liablity in Case if Assessee is Covered under Section 44AD (Presumptive Taxation) of the L.T. Act 1961

On or before 15 Jun, 2016

 

Not less than 15% of advance tax

-

On or before 15 Sep, 2016

Not less than 45% of advance tax as reduced by the amount paid in the earlier instalments.

-

On or before 15 Dec, 2016

Not less than 75% of advance tax as reduced by the  amount paid in the earlier instalments

-

On or before

The whole amount (100%) of advance tax as reduced by the amount paid in the earlier instalments

The whole amount (100%) of advance tax as reduced by the amount paid in the earlier instalments


Notes :

1) Resident individuals who are over 60 years of age and do not have income chargeable under the head Profits and Gains of Business or Profession' are not required to pay advance tax.

2) Any amount paid by way of advance tax on or before 31st March shall also be treated as advance tax paid during financial year ending on that day.

3) Deduction under Chapter VIA are allowable while computing liability of advance tax.

4) TDS is to be reduced from total tax liability of assesscc and then specified percentage be calculated of advance tax.

Mode of Payment of Advance Tax :

Advance Tax can be deposited through cash, cheque and electronic mode (Debit Card/Credit Card). The challan specified for advance tax is ITNS 280. All designated branches of banks empanelled with the Income Tax Department are accepted the advance tax. Assessee can pay Advance Tax Online through TIN-NSDL website.

When Assessee Deemed to be in Default :

An assessee shall be deemed to be an assessee in default in the following conditions :
  1. If any assessce does not pay on the due date (specified in section 211) any instalment of advance tax that he is required to pay by an order of the Assessing Officer.
  2. If any assessee does not, on or before the due date, send to the Assessing Officer an intimation that as per his estimate of the current income the advance tax payable would be less than the amount specified in his order or does not pay on the basis of his estimation of his current income the advance tax payable by him.
Penalty in Case of Shortfall of Advance Tax Payment :

If advance tax is not paid or the amount of advance tax paid is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest @1% p.m. u/s 234B from 1st day of assessment year up to date of deposit tax & interest. Further u/s 234C if the payment of advance tax is deferred beyond the due dates, interest @1% p.m., for a period of 3 months, will be payable for every deferment, except for the last installment of 15th March where it will be 1% for one month.

Verification Status of Advance Tax Payment :

Due care should be taken with respect to PAN, Assessment Year and tax Code before depsoiting advance tax. The assessee may verify status his Advance Tax deposited through following links :
  1. Form No.26 AS : The credit of tax depsoited would be reflected in Form 26AS within one week of making the payment.
  2. NSDL E-Governance : Challan Status Inquiry can be made through OLTAS Application (NSDL) by visiting https://tin.tin.nsdl.com/oltas/index.html.
Interest for Deferment of Advance Tax :

1) In the Case of Companies :
Where the advance tax paid by a company on or before 15th June is less than 15% of tax due on returned income or the amount of advance tax paid on or before 15 September is less than 45% of tax due on returned income or the amount of advance tax paid on or before 15 December is less than 75% of tax due on returned income, the company shall be liable to pay simple interest @ 1% per month for a period of three months on the amount of shortfall in each installment.
However, if the advance tax paid by the company on or before 15 June is not less than 12% of tax due or the amount of advance tax paid on or before 15 September is not less than 36% of tax due on returned income, then no interest shall be charged.

2) In the Case of All Assessees Other than Companies : 
Where in any financial year an assessee (other than a company, who is liable to pay advance tax or, the advance tax paid by the assessee on his current income on or before 15th September is less than 30% of the tax due on the returned income or the amount of such advance tax paid on or before 15th December is less than 60% of the tax due on the returned income, then the assessee shall be liable to pay simple interest @ 1% per month on the amount which is short from 30% or 60%, as the case may be, for a period of three months.

Where the advance tax paid by a company or any other assessee on the current income on or before 15" March is less than the tax due on the returned income, the assessee shall be liable to pay simple interest @ 1% on the amount of shortfall from the tax due on the returned income. The amendment relates to payment of interest by the applicant who makes an application to the settlement commission for settlement of case under Section 245C.

In case the settlement is made at a figure higher than the amount disclosed in the application resulting in payment of additional tax, interest will be chargeable under section 234B @ 1% for the period commencing from the 1st day of April of the relevant year and ending on the date of the order of the commission under section 245D(4) on the difference between the settled and disclosed income tax liability (w.e.f. 1.6.2015).

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