The due date to pay the third installment of the advance tax for the fiscal year 2022-2023 is on December 15, 2023, whose estimated income comes under tax liability of crossing over Rs.10,000 in a financial year needs to pay advance tax. 

As per Section 208 of the Income-tax Act, when the person’s estimated tax liability for the year (i.e.for the year in progress such as FY 2021-22, FY 2022-23, etc.) exceeds Rs.10,000 after the TDS process requires to pay their tax for the year in advance during the same financial year and be provided with the facility to make the payment in installments. 

Close-up of economist using calculator while going through bills and taxes in the office. Image source: Freepik

Advance tax is the amount of income tax that is paid in advance rather than paying a lump sum amount at year-end. The advance tax also called earn tax and the amount of the installment to be paid on the stipulated due dates set by the Income tax department. Under Section 234B, penal interest is assessed on the dues of advance tax.

A salaried person who doesn’t have income other than salary is not obliged to pay advance tax installments yet comes under the condition of paying applicable tax to the Income Tax Department. 

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In addition to the above, a resident senior citizen (an individual of the age 60 years or above) not having any means of income from business or profession is not liable to pay advance tax. 

TDS stands for tax deducted at source, the step to collecting tax at the source from where an individual income is generated. TDS is applicable on various incomes such as salaried, interest received, the commission received, dividends, etc. Different TDS rates have been specified by the Income tax act, of 1961 for different payments and different categories of recipients. 

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TDS is not applicable in cases: When the amount is paid to the government or any government body and the Reserve Bank of India does not come under TDS. The amount is paid to notified mutual funds under  Section 10(23D). When a deductee has a certificate of no-deduction under Section 192 of the Income Tax Act. 

For instance, if your total tax liability for the year is Rs. 5 lakh, you should pay Rs. 3, 75, 000 (75% of Rs 5 lakh) as tax by December 15. If you have already paid Rs 3, 00,000 in the form of advance tax and TDS, you should pay the remaining Rs 75,000 by December 15. 

You can pay the advance tax either through an online or offline method. To pay offline, buy and fill tax payment challans (challan no. 280) at bank branches authorized by the Income Tax Department. 

Bills and taxes in the office. Image source: Freepik

Penalty for failing to pay the installments on due dates. 

If you miss out on paying the installments on due dates, penal interest is imposed on the due amount following up every month. Interest be charged on the shortfall amount. For instance, if you failed to make the entire amount for the first installment, your tax liability for the second installment on September 15 would have been Rs.2,25,000 (45 percent of Rs. 5,00,000) along with interest on the first installment dues.

Interest applies at 1 percent per month for the three months i.e.., June 15 to September 15, Rs. 2250 (15% of Rs. 5,00,000 = 75,000, 3% of Rs.75,000 – 2250) first installment dues. So, you should have paid a total of Rs.2, 27,250 as tax to be in the direction set by the Income Tax Department. 

Read More: The Biggest Enemies of Taxpayers are Political Parties who take Shortcuts: PM Modi


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