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  • Advance Tax Examples and Payment Due Dates:

    Liability to pay Advance Tax:

    According to section 28 of the Income Tax Act, 1961, every individual whose tax liability for the year is Rs.10,000 or more is liable to pay tax in advance in the form of “Advance tax”. Though it is clear that any individual with a tax liability of Rs.10,000 or more should pay advance tax, a senior citizen who does not earn income from business or profession is not liable to pay the advance tax.

    Advanced Tax Example:

    Let’s consider a few examples for the above mentioned situation:

    Example-1:

    Mr. Ajay runs an electrical goods store. The total turnover for the store for the year 2016-2017 amounts to 85,00,000. Now, Mr. Ajay wants to declare income under section 44D of the Income Tax Act, at 8% of the turnover. He does not earn income from any other source. Will he be liable to pay advance tax?

    In this particular case, Mr. Ajay fulfils the criteria of section 44D in regard to the electrical goods business and can adopt the provisions of section 44D and declare income at around 8% of the turnover. Mr. Ajay is liable to pay advance tax in regard to business covered under the section 44D if he chooses to adopt the provisions of section 44D.

    Due Dates for payment of Advance Tax:

    Advance tax has to be paid in installments. There are different installments for advance tax. Given below are the different due dates for advance tax payments:

    Status By 15th June By 15th September By 15th December By 15th March
    All assessees other than eligible assessee as referred to in Section 44D Up to 15% of advance tax Up to 45% of advance tax Up to 75% of advance tax Up to 100% of advance tax
    In case of eligible assessee as referred to in section 44D Nil Nil Nil 100% of advance tax

    Example-2:

    Ms. Kanika is a doctor whose estimated tax liability for the year 2016-2017 is Rs.1,00,000. Now the question arises as to when she should pay her advance tax and how much should she pay as advance tax. Every individual has to discharge their tax liability as advance tax if the estimated tax liability of the individual is more than Rs.10,000.The due date for different installments of for advance tax payment is mentioned below:

    Status By 15th June By 15th September By 15th December By 15th March
    All assessees other than eligible assessee as referred to in Section 44D Up to 15% of advance tax Up to 45% of advance tax Up to 75% of advance tax Up to 100% of advance tax
    In case of eligible assessee as referred to in section 44D Nil Nil Nil 100% of advance tax

    Since Ms. Kanika does not earn income from any other business, she is not eligible to obtain benefit of presumptive taxation scheme under Section 44AD. She has to pay the advance tax in installments as explained below:

    • Ms. Kanika has to pay the first installment of her advance tax on June 15th, 2016. She should pay 15% of her tax liability in advance. Hence, she should pay Rs.15,000 by 15th of June.
    • The second installment of the advance tax payment should be made by the 15th of September. Ms. Kanika has to pay 45’% of her tax liability by the 15th of September which is Rs.45,000. Now considering she has already paid the first installment of Rs.15,000, she has to pay Rs.30,000 for the second installment of her advance tax payment.
    • The third installment should be made by 15th of December. 75% of tax liability should be paid as advance tax in the third installment. Considering Ms. Kanika has paid the first two installments which amounts to Rs.45,000 in total, she has to pay Rs.30,000 for the third installment to bring the total installment payment for advance tax to Rs.75,000.
    • The fourth and final installment for the advance tax payment should be made by the 15th of March. Ms. Kanika should pay 100% of her tax liability as advance tax for the fourth installment. Considering she has made the first three installments, she has to pay a balance of Rs.25,000 on account of advance tax by the 15th of March.

    Mode of Advance Tax Payment:

    A corporate taxpayer should pay taxes through electronic payment mode using internet facility of that particular bank according to Rule 125 of Income Tax rules, 1962. Other taxpayers can pay their taxes through the electronic mode or by the physical mode.

    TAX
    Forms:
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