How to Calculate Advance Tax............

Suresh Prasad (www.aubsp.com) (15630 Points)

10 December 2010  
Payment of Advance Tax (How to Calculate Advance Tax)


Meaning of Advance Tax , Who is liable to Pay Advance Tax, Rates of Advance Tax, Installment and Due Dates of Advance Tax, How to Deposit Advance Tax, Advance Tax Calculator in Excel , Complete Procedure of Advance Tax, Interest for deferment of Advance Tax , Waiver of Interest, Interest for non/short Payment of Advance Tax, Interest on excess Payment of Advance Tax  are detailed given below :- 
ADVANCE TAX

Meaning of Advance Tax
Payment of Advance Tax on estimated Income during the current year  is required to pay for all assesses. As example,  In the Financial Year 2010-11 (Assessment Year 2011-12) advance tax is payable in installments during the period 01.04.2010 to 31.03.2011 itself.   The total amount of Advance Tax will be adjusted during the Assessment Year 2011-12 at the time of assessment. 
 
Who is liable to Pay Advance Tax
1)  Advance Tax is required to pay under section 208 of Income Tax Act 1961 for all those assesses including Salaried and Pensioners whose advance tax on estimated income comes (after deducted TDS/TCS if any)  to Rs. 10,000/- or more in a Financial Year F.Y. 2010-11.
    Thus, if Income Tax payable (after deducting all deductions, rebates and TDS) is less than 10000 in a financial year 2010-11, there is no need to deposit any Advance Tax and the same tax will be deposited at the time of self assessment before filing of income tax return.
2)  In case an order u/s 210(3) is received by the person to pay an amount by way of Advance Tax  in Form No. 28, should deposit such amount in the installments as specified in the order.  This type of orders can be issued upto the last day of February of the Financial year.
     If that person estimates his income at a higher amount than that specified in the orders u/s 210(3), then he should pay advance tax in accordance with such higher estimate.
    However under sections 210(4) & (5) of Income Tax Act 1961, if he estimates him income at a lower amount, then he should send an estimate of such lower income in Form28-A, before the next installment falls due and deposit the remaining installments of advance tax accordingly. 
 
Dues dates and Installments of Advance Tax

Installment Number and Due Date
For Other than Companies
(Individuals, HUF,Partnership Firms and others)
For Companies
(Limited or Private Companies)
1) 15th  Jun.
2) 15th  Sep.
3) 15th  Dec.
4) 15th  Mar.
5) 31th  Mar.
Nil
30% of Advance Tax
30% of Advance Tax
40% of Advance Tax
Tax on Capital gains or casual incomes arising after 15th March, if any
15% of Advance Fax
30% of Advance Tax
30% of Advance Tax
25% of Advance Tax
Tax on Capital gains or casual incomes arising after 15th March, if any
Notes: -
1)     Any amount deposited by 31st March, is treated as advance tax for that    Financial Year.
2)      If the last day of payment of any instalments of advance tax is a day on which the receiving bank is closed, the assessee can make the payment of the next immediately following working day, and in such cases, the mandatory interest leviable u/s 234B and 234C would not be charged vide CBDT’s circular No. 676 dated 14.01.1994.
 

Important Note for Salaried Tax-Payers : 
                 Advance Tax is different from Tax Deducted at Source (TDS).  In case of salaried people, normally tax is deducted at source from their salaries, by the employer.  Their income for the year is estimated, tax calculated thereon and 1/12th of such estimated tax is deducted from their monthly salary bill. 
          Salaried persons are normally not required to pay advance tax.  However, in case the tax liability estimated for the year is more than the TDS, then such employees shall be liable to pay advance tax as indicated above. 
 
How to Calculate Advance Tax 
          Advance Tax is payable (in installments , as above) on total income (estimated for the Financial Year) including capital gains and casual incomes such as winning from lotteries races, etc and after adjusting expenses or losses.
  1. Therefore, income for the current year should eb estimated as precisely and correctly as possible. 
  2. If any capital gain or casual income arises subsequent to payment of an installment , the remaining installments of advance tax should be accordingly revised.  If any such income arises after 15the March, tax should be deposited on such incomes latest by 31st March of the Financial Year. 
  3. Remember, non/short payment and deferment of Advance Tax attracts penal interest.
Rates of Advance Tax

        Rates of Advance Tax are declared in the Finance Act every year.  The rates of advance tax shown in above are as per Finance Act 2010.
 
How to Deposit Advance Tax 
       Advance Tax can be deposited through Challan No. 280 in the Government Treasury (RBI) or any of of the authorised branches of nationalised banks.   Printed challan forms are available with the Income Tax Office free of cost.  While filing challan the following fields are required to be filed. 
  1. Assessee's Name
  2. Complete Address of Assessee.
  3. Permanent Account Number 
  4. Assessment Year 
  5. Assessing Officer's Ward or Circle 
  6. Amount of Advance Tax, Surcharge and Cess (if any).
     Online deposit of Advance Tax is best payment method.  When we deposit or pay online Advance Tax, there is no need to collect Physical Challan No. 280 or no need to stand in big rows to deposit advance tax in banks or treasury etc.  For  online Tax payment.