Let’s try to understand the advance tax calculations with some examples
Example 1:
Shreya, a resident of India, aged 38, has a gross revenue of ₹20,00,000 from her business. She estimates her expenses to be 13,00,000. She has also been contributing towards PPF & LIC premiums amounting to ₹80,000 & 60,000 respectively. TDS deducted is ₹10,000. Interest income from fixed deposit is ₹15,000.
What are the advance tax implications if she opts for the new regime?
Answer:
Advance tax is applicable when the total tax liability exceeds ₹10,000. So, let’s first calculate the tax liability:
Since the tax liability exceeds ₹10,000, Shreya is required to pay advance tax as per the due dates shown in the above table.
Example 2:
Mr. Kapoor aged 42, has the following income for FY 2022-23
- Taxable salary income: ₹12,00,000
- Net rent income: ₹2,00,000
- LTCG from shares & securities: ₹2,50,000
- Interest from Debentures of a company: ₹10,000 (after TDS of ₹1,000)
- Investment in NSC: ₹1,50,000
What is his advance tax liability as per the old regime?
Answer:
Computation of taxable income and tax liability of Mr. Kapoor for the year 2022-23
As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of “advance tax”. In this case, the tax liability amounts to ₹2,13,032 and, hence, Mr. Kapoor is liable to pay advance tax.
Example 3:
Let’s say in the above example, Mr. Kapoor fails to make the payment of 2nd installment of advance tax on the due date of 15 September 2022 and makes the payment on 30 October 2022.
Also, he skipped the last installment payable on 15 March and made the payment of the entire tax at the time of return filing on 30 May 2023. What is the penalty implication? (Assuming he has paid all other advance tax installments on time)
Answer:
Computation of advance Tax Payable
| Due Date | Advance tax | Amount Payable (in ₹) | Amount Paid (in ₹) | Difference (in ₹) | Interest u/s 234C (1% per month) | Interest u/s 234B (1% per month) | Tax to be paid (in ₹) |
|---|---|---|---|---|---|---|---|
| 15th June | 15% | 31,940 | 31,940 | 0 | 0 | 0 | 31,955 |
| 15th September | 45% | 95,819 | 31,940 | 63,879 | 1,278 | 0 | 65,186 |
| 15th December | 75% | 1,59,699 | 63,879 | 95,820 | 0 | 0 | 95,866 |
| 15th March | 100% | 2,12,932 | 1,59,699 | 53,233 | 532 | 1,065 | 54,856 |
When Mr. Kapoor makes a defualt in the payment of advance, he is liable for an interest penalty.
The late payment made on 30 October is 65,157 which includes the interest (₹1,278) u/s 234C at 1% per month or part thereof (ie, 2 months: September & October).
Mr. Kapoor also defaults in the payemt for March 2022 and makes the payment at the time of filing of return of FY 2022-23 on 30 May 2023. In this case, he will have to make the payment of ₹54,830, which includes the interest (₹532) u/s 234C at 1% per month or part thereof (ie, 1 month: March) and interest (₹1,065) u/s 234B at 1% per month or part thereof (ie, 2 month: April & May)