Advance tax is basically a device to ensure regular flow f revenue to the government so as the expenditure can be incurred by the government all over the year and not once in a year. An assessee need to pay the taxes only after the completion of the previous year on the previous year income but in the rule of advance tax, the assessee needs to estimate the preassumed earning and need to pay the advance tax of the quarter accordingly. Advance taxes ruling are as under.
An assessee whose estimated tax liability is less than 5000 is not liable to pay advance tax: - if an assessee has the estimated tax liability 5000 or less, then he needn’t to pay the advance tax. Advance tax are for has the liability more than 5000 rupees. Accordingly, Rs. 5000 is the threshold limit for the payment of advance tax.
Liability for the payment of advance tax:- according to section 207 of income tax act, advance tax is payable during any financial year on the total income on which would be chargeable to tax in the assessment year immediately following the financial year. Such income is termed as current income.
Scheme applies to every income: - advance tax scheme applies to every kind of income on which income tax applies or the Tax deduction at source (TDS). Advance tax applies to resident of
as well as non residents too. India
Agent liable to pay advance tax on behalf of non residents: - the liability of agents to pay the advance tax on behalf of the non resident principle would arise of the assessing officer serves him with a notice under Sec 163 and after hearing him decides to treat him agent for the non resident principal. Once a person is held as an agent of the non resident principal for a particular assessment year, he may be required to pay advance tax for that year[Premier auto vs. S.N.Shrivastva(1970) 76 ITR 1(SC)].
Completion of regular assessment for any past assessment year is not a bar for payment of advance tax by an assessee [Section 210(1)]:- where the advance tax liability for an assessee for any financial year is Rs. 5000 or more, he is liable to pay advance tax according to his own estimate for such year even if he has not been assessed so far by way of regular assessment under section 143(3) and section 144 of income tax act.
Notice of demand issued by the assessing officer Section 210 of income tax act.
It is obligatory for every person to pay advance tax accordingly to his estimate without any notice from the assessing officer. However the assessing officer is also empowered to issue a notice to any person liable to pay advance tax under section 210 directing him to pay advance tax. Such power may be exercised in accordance with the following provision.
1- notice to be issued only to an assessee, assessed by way of regular assessment for any year: - where any person has been assessed for any previous year by way of regular assessment and in the opinion of the assessing officer, such person is liable to pay advance tax, he may serve a notice demand in Form no. 28 (under rule 38) on such person.
2- Time limit to issue notice of demand:- demand notice for advance tax may be issued at any time during the financial year nut not later than the last day of February of the relevant year, specifying the amount of advance tax and the number of installments in which such tax is to be paid.
3- Basis of computation of advance tax: - the assessing officer is required to compute advance tax liability in such a case on the basis of higher of the two incomes.
- Total income of the latest assessed previous year by way of regular assessment.
- Total income disclosed in the return for any subsequent previous year.
4- Non agricultural income to be taken into account in computing advance tax payable by an individual or an H.U.F:- while computing the advance tax liability of an individual or an H.U.F., the assessing officer is also required to consider agriculture income of the relevant previous year if it exceeds Rs. 5000.
5- Revision of the notice of demand: - the assessing officer may also amend the notice of demand if the assessment of the subsequent previous year at higher income is completed by way of regular assessment or if the assessee disclose higher income in return furnished before 1 march in response to a notice issued under section 142(1) of the income tax act.
6- Adjustment for the tax deductible at source (TDS):- the assessing officer is also required to give due adjustments for the amount of TDS on the income included in the current income on which advance tax is computed.
7- Payment of advance tax to be made by the assessee either as per notice demand or as per his own estimate: - on receipt of the notice of demand, the assessee is liable to pay advance tax accordingly. However if such assessee considers that the advance tax payable on current income of the relevant financial year would be less, he may send an intimation to the assessing officer in the Form no 28A and pay advance tax accordingly under section 210(5) of income tax act. Conversely, if the advance tax payable would be higher than the amount specified ion the demand notice, he should pay advance tax according to his estimate under section 210(6) of income tax act.
8- Consequences for non payment of advance tax: - where an assessee who is served with a notice of demand by the assessing officer under section 210 of income tax act to pay advance tax, neither pay such tax as directed by the notice on or before the date on which any such installment becomes due nor pays advance tax according to his estimate of current income, he is deemed to be an assessee in default under section 218 of income tax act.
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