{"id":25297,"date":"2019-10-04T17:20:40","date_gmt":"2019-10-04T11:50:40","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=25297"},"modified":"2023-06-22T15:28:47","modified_gmt":"2023-06-22T09:58:47","slug":"understanding-advance-tax-and-penalty-under-advance-tax","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/understanding-advance-tax-and-penalty-under-advance-tax\/","title":{"rendered":"Understanding Advance Tax and Penalty Under Advance Tax"},"content":{"rendered":"<p>Advance Tax is applicable on every self-employed businessperson, professionals, freelancers, whose income falls within the jurisdiction of Income Tax Act, 1961. Any taxpayer, including Non-Resident Indians, who have their income from India and their tax liability exceeds INR 10,000 has to pay the advance tax compulsorily. Therefore, it is necessary to know about the provisions and various penalty under the advance tax.<\/p>\n\n\n\n<p>Senior citizens who\ndon&rsquo;t have any income from business or profession are exempted from the purview\nof this section. Any assessee who receives Income whose payer at the time of\nmaking such payment deducts the tax on source needs not to make any advance\npayment of tax, for example, salaried employees.<\/p>\n\n\n\n<p>Taxpayers who opt for\nthe Presumptive Taxation Scheme under the Income Tax Act have to pay the entire\namount of advance tax on or before the 15<sup>th<\/sup> day of March.&nbsp; Presumptive Taxation Scheme was introduced to reduce the tax burden of small businessmen\nand professionals. As per this scheme, the business income is assumed to be <em>8% of the gross or total turnover <\/em><strong>(6% in case the gross receipt is received\nthrough any electronic modes, account payee bank draft or cheque)<\/strong>. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Scope of Advance Tax<\/strong><\/h2>\n\n\n\n<p><strong>Following taxpayers are covered within the scope of Advance Payment of Tax:<\/strong><\/p>\n\n\n\n<ul>\n<li><strong>Salaried employees,\nfreelancers, and businessmen: <\/strong>Payment of advance tax applies on every taxpayer including\nsalaried employees, freelancers or businessmen provided income tax liability\nexceeds INR 10,000. However, the advance tax does not apply to a senior citizen\nwho is above the age of 60 years and does not have any income from the business. <\/li>\n\n\n\n<li><strong>Businessmen who opt for\nPresumptive Scheme:&nbsp; <\/strong>The taxpayers who are\nbusinessmen and opt for presumptive taxation scheme under section 44AD are\nrequired to pay the entire advance tax in only one installment on or before 15<sup>th<\/sup>\nMarch.<\/li>\n\n\n\n<li><strong>Professional who opts\nfor Presumptive Taxation Scheme: <\/strong>The taxpayers who are independent professionals such as lawyers,\npracticing CA, practicing CS, architect, etc. come under the purview of section\n44ADA. They have to pay their entire advance tax liability in one installment\non or before 15<sup>th<\/sup> March.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Due Dates for Advance Tax<\/strong><\/h2>\n\n\n\n<ul>\n<li><strong>Due dates for the\npayment of Advance Tax <\/strong><strong>for taxpayers other than those who opt for\nPresumptive Scheme:<\/strong><strong><\/strong><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n  <strong>Due Date<\/strong>\n  <strong>&nbsp;<\/strong>\n  <\/td><td>\n  <strong>Percent of Advance Tax\n  to be paid<\/strong>\n  <\/td><\/tr><tr><td>\n  On or before 15<sup>th<\/sup> June\n  &nbsp;\n  <\/td><td>\n  15% of Advance Tax\n  <\/td><\/tr><tr><td>\n  On or before 15<sup>th<\/sup> September\n  &nbsp;\n  <\/td><td>\n  45% of Advance Tax\n  <\/td><\/tr><tr><td>\n  On or before 15<sup>th<\/sup> December\n  &nbsp;\n  <\/td><td>\n  75% of Advance Tax\n  <\/td><\/tr><tr><td>\n  On or before 15<sup>th<\/sup> March\n  <\/td><td>\n  100% of Advance Tax\n  &nbsp;\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<ul>\n<li><strong>Due dates for the\npayment of Advance Tax for the taxpayers who opt for Presumptive Scheme under\nsection 44AD and 44ADA:<\/strong><strong><\/strong><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n  <strong>Due Date<\/strong>\n  <strong>&nbsp;<\/strong>\n  <\/td><td>\n  <strong>Percent of Advance Tax\n  to be paid<\/strong>\n  <\/td><\/tr><tr><td>\n  Up to 15<sup>th<\/sup> March\n  &nbsp;\n  <\/td><td>\n  The full amount of Advance Tax\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<figure class=\"wp-block-image\"><a href=\"https:\/\/enterslice.com\/nbfc-registration\" target=\"_blank\" rel=\"noreferrer noopener\"><img decoding=\"async\" loading=\"lazy\" width=\"730\" height=\"90\" src=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/08\/20190624064611_730x90.png\" alt=\"NBFC Consultant in India\" class=\"wp-image-22628\" srcset=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/08\/20190624064611_730x90.png 730w, https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/08\/20190624064611_730x90-300x37.png 300w\" sizes=\"(max-width: 730px) 100vw, 730px\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The Penalty in Default of Advance Tax Payment<\/strong><\/h2>\n\n\n\n<p><strong>As per section 234B, interest is levied as a penalty on the following taxpayers:<\/strong><\/p>\n\n\n\n<ol>\n<li>Fails to pay the advance tax up to the due date; or<\/li>\n\n\n\n<li>Have paid less than 90% of the advance tax assessed during the\nyear.<\/li>\n<\/ol>\n\n\n\n<p><strong>Rate of Interest:<\/strong> The taxpayer for default payment in advance tax is penalized for <strong><em>paying\ninterest at the rate of 1% simple interest per month. The interest is\ncalculated on the unpaid amount of advance tax. <\/em><\/strong><\/p>\n\n\n\n<p>The penalty is levied with effect from 1<sup>st<\/sup> April of the relevant financial year till the date of self-assessment of tax or till the date of total income determined under section 143(1) (earlier of the two). As per <strong>section 143(1)<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Income_tax_in_India\">[1]<\/a><\/sup>, Income Tax Department issues the notice to the taxpayer determining the tax liability. In layman terms, interest is calculated from the due date till the date of actual payment. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Penalty for Default in An Installment of Advance Tax Payment<\/strong><\/h3>\n\n\n\n<p>The penalty in the form of interest is levied under <a href=\"https:\/\/enterslice.com\/learning\/section-234c-interest-for-deferment-of-advance-tax\/\">section 243C<\/a> if the installment paid is less than the advance tax required: <\/p>\n\n\n\n<ul>\n<li>If the advance tax paid on or before 15<sup>th<\/sup> June: <strong>less than 12% of the advance tax payable<\/strong><strong><\/strong><\/li>\n\n\n\n<li>If the advance tax paid on or before 15<sup>th<\/sup> September<strong>: less than 36% of the advance tax payable<\/strong><strong><\/strong><\/li>\n\n\n\n<li>If the advance tax paid on or before 15<sup>th<\/sup> December: <strong>less than 75% of the advance tax payable<\/strong><strong><\/strong><\/li>\n\n\n\n<li>If the advance tax paid on or before 15<sup>th<\/sup> March: <strong>less than 100% of the advance tax payable<\/strong><\/li>\n<\/ul>\n\n\n\n<div class=\"shadow1\">However, if the taxpayer opts for the presumptive scheme under section 44ADA or 44AD has to pay interest if he does not pay 100% of the advance tax payable on or before 15th March. <\/div>\n\n\n\n<p><strong>Exception: <\/strong>There will be no levy of interest under section 234C in case the\ntaxpayer fails to assess the following income under <\/p>\n\n\n\n<ul>\n<li>Capital Gain; or<\/li>\n\n\n\n<li>Income for winning of\nlotteries, crossword puzzle, etc. as referred\nto in section 2(24)(ix); or<\/li>\n\n\n\n<li>Income from a new\nbusiness.&nbsp; <\/li>\n<\/ul>\n\n\n\n<p><strong>Period of Interest:<\/strong> Interest under section 234C is levied for three months for the\ndefault or shortfall in payment 1<sup>st<\/sup>, 2<sup>nd<\/sup> and 3<sup>rd<\/sup>\ninstallment of advance tax. Interest is levied for one month in case of default in the\nlast installment.&nbsp; <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Illustration for Better Understanding of Section 234C<\/strong><\/h4>\n\n\n\n<p>Mr. X is a businessman.\nHis taxable liability is INR 45500. He has paid advance in following slabs:<\/p>\n\n\n\n<p>INR 8000- 15<sup>th<\/sup>\nJune<\/p>\n\n\n\n<p>INR 11000- 15<sup>th<\/sup>\nSeptember<\/p>\n\n\n\n<p>INR 12000- 15<sup>th<\/sup>\nDecember<\/p>\n\n\n\n<p>INR 14500- 15<sup>th<\/sup>\nMarch<\/p>\n\n\n\n<ol>\n<li><strong>For the first installment:<\/strong> 15% of 45500 = 6825 shall be paid within 15<sup>th<\/sup> June.\nHowever, Mr. X has paid 8000. Thus no interest is levied. <\/li>\n\n\n\n<li><strong>For the second installment:<\/strong> 45% of 45500 = 20475 shall be paid within 15<sup>th<\/sup>\nSeptember. He has paid 8000+11000= 19000. There is a shortfall of 1475, but\nthere will be no interest levied because he has paid a minimum 36% of advance\ntax: 36% of 45500 = 16380.&nbsp;&nbsp; <\/li>\n\n\n\n<li><strong>For the third installment:<\/strong> 75% of 45500 = 34125 shall be paid within 15<sup>th<\/sup>\nDecember. Advance Tax paid 8000+11000+12000 = 31000.&nbsp; The shortfall of the payment is INR 3125.\nThus he will be liable to the payment of interest at the rate of 1% for 3\nmonths under section 234C. Interest levied = 3125*1\/100*3 = 93.75 (rounded off\nto INR 93).<\/li>\n\n\n\n<li><strong>For the last installment:<\/strong> 100% of 45500 shall be paid by 15<sup>th<\/sup> March.&nbsp; Total Advance Tax paid by the taxpayer is\n8000+11000+12000+14500 = 45500 is paid within the due date. And thus no\ninterest is levied for the last installment. <\/li>\n<\/ol>\n\n\n\n<div class=\"read\"><p><b>Read More:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/advance-tax\/\" target=\"_blank\" rel=\"noopener noreferrer\">FAQs on Advance Tax <\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Advance Tax is applicable on every self-employed businessperson, professionals, freelancers, whose income falls within the jurisdiction of Income Tax Act, 1961. Any taxpayer, including Non-Resident Indians, who have their income from India and their tax liability exceeds INR 10,000 has to pay the advance tax compulsorily. Therefore, it is necessary to know about the provisions [&hellip;]<\/p>\n","protected":false},"author":24,"featured_media":25298,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1473,2435],"tags":[2776,2775],"acf":{"service_id":"127"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Understanding Advance Tax and Penalty under Advance Tax - Enterslice<\/title>\n<meta name=\"description\" content=\"The penalty under Advance Tax - Advance Tax is applicable on every self-employed businessperson, professionals, freelancers under the Income Tax Act, 1961.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/understanding-advance-tax-and-penalty-under-advance-tax\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Understanding Advance Tax and Penalty under Advance Tax - Enterslice\" \/>\n<meta property=\"og:description\" content=\"The penalty under Advance Tax - Advance Tax is applicable on every self-employed businessperson, professionals, freelancers under the Income Tax Act, 1961.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/understanding-advance-tax-and-penalty-under-advance-tax\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2019-10-04T11:50:40+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-06-22T09:58:47+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/10\/imgpsh_fullsize_anim-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"630\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Savvy Midha","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/10\/Savvy-Midha.jpg","authorDescription":"\"Savvy Midha holds the degrees of Bachelor of Commerce(honors), LL.B and Company Secretary. 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