As the monetary 12 months 2021-22 is coming to an finish, it’s time for the taxpayers to judge if any advance tax legal responsibility is due. Any particular person who has taxable revenue is liable to pay revenue tax on his/ her complete revenue earned throughout a specific monetary 12 months. The revenue tax is calculated as per the provisions of the Income Tax Act, 1961 (Act) and is straight paid to the Central Government by way of completely different modes i.e., tax deducted at supply (TDS), tax collected at supply (TCS), advance tax and self-assessment tax.
For salaried people, the employer withholds tax on the wage revenue and remits this tax to the federal government. Banks additionally normally withhold tax on curiosity funds on mounted deposits. However, if there are different sources of revenue on which no TDS has been deducted or if the tax deducted just isn’t adequate to cowl the tax legal responsibility on the revenue, there’s a must discharge the tax legal responsibility (if greater than ₹10,000) by the use of advance tax.
Let us perceive the calculation of advance tax with the assistance of an instance:
Nikita, a salaried skilled, earns taxable wage revenue of ₹30 lakh and curiosity revenue of ₹5 lakh, through the monetary 12 months 2021-22. Nikita’s employer has deducted TDS of ₹7 lakh on wage and financial institution has deducted tax of ₹50,000 on the curiosity revenue. She can also be eligible for Chapter VI-A deduction of ₹1.5 lakh.
This is how advance tax is to be calculated:
Particulars Amount (in Rs)
Income from wage – ₹30 lakh
Income from different sources – ₹5 lakh
Gross complete revenue – ₹35 lakh
Less: Deductions underneath Chapter VI-A of the Act (1,50,000)
Total revenue after deduction – ₹33.5 lakh
Tax on complete revenue (together with cess) (A) – ₹8.5 lakh
Less: TDS deducted by employer (B) – ₹7 lakh
Less: TDS deducted by financial institution (C) – ₹50,000
Advance tax payable (A-B-C) – ₹1 lakh
In the above case, Nikita is liable to pay advance tax of ₹1 lakh, which is payable in 4 installments as given beneath:
On or earlier than 15 June, 15% of advance tax is payable – ₹15,030
On or earlier than 15 September, 45% of advance tax is payable – ₹45,090
On or earlier than 15 December, 75% of advance tax payable – ₹75,150
On or earlier than 15 March, your entire ₹1 lakh tax is to be paid
It is fascinating to notice that any tax paid until 31 March will probably be handled as advance tax. The advance tax might be paid by way of each on-line and offline modes utilizing tax cost challans (challan quantity 280). Once the advance tax is paid, it is going to be mirrored in Form 26AS inside 3-4 working days, which might be reported within the revenue tax return on the time of submitting ITR.
If a person fails to pay the advance tax legal responsibility or misses any of the installments on or earlier than the desired due dates or there’s a shortfall in cost, the due quantity will appeal to curiosity of three% per quarter for the primary 3 quarters and 1% for the ultimate quarter. An particular person will even be liable to pay extra curiosity from April (after the top of monetary 12 months) on the fee of 1% monthly on the shortfall of advance tax, in case the advance tax paid by such a person is lower than 90% of the overall tax payable.
In some circumstances, advance tax doesn’t apply, equivalent to within the case of a resident senior citizen (particular person aged 60 years or extra) who doesn’t have any revenue from enterprise/ occupation. Also, as it’s virtually not doable to estimate the revenue from capital features and dividend revenue prematurely, subsequently in such circumstances, if any such revenue arises after the due date of any installment, then the tax calculated on such revenue shall be paid in remaining installments of advance tax that are due.
As the due date, i.e 15 March 2022 for cost of the ultimate installment of advance for the monetary 12 months 2021-22 is quick approaching, it’s endorsed to judge your advance tax legal responsibility and pay the identical on time, even when funds for prior installments have been missed, to keep away from additional curiosity implications.
(Rama Karmakar, Tax Partner – People Advisory Services at EY India.)
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