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Computation of Advance Tax – Income Tax Act

Computation of Advance Tax – Income Tax Act. In this article, we are going to provide information about Computation of Advance Tax – Income Tax Act. Advance Tax means, income tax should be paid in advance instead of lump sum payment at year end. It is also known as pay as you earn tax. These payments have to be made in installments as per due dates provided by the income tax department.

Computation of Advance Tax – Income Tax Act

The following is an clear cut explanation of Computation of advance tax:

Computation of advance tax

The following is the  Computation of advance tax.

  1. An assessee has to estimate his current income and pay advance tax thereon. He need not submit any estimate or statement of income to the Assessing Officer, except where he has been served with notice by the Assessing Officer.
  2. Where an obligation to pay advance tax has arisen, the assessee shall himself compute the advance tax payable on his current income at the rates in force in the financial year and deposit the same, whether or not he has been earlier assessed to tax.
  3. In the case of a person who has been already assessed by way of a regular assessment in respect of the total income of any previous year, the Assessing Officer, if he is of the opinion that such person is liable to pay advance tax, can serve an order under section 210(3) requiring the assessee to pay advance tax.
  4. (4) For this purpose, the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment or the total income returned by the assessee in any return of income for any subsequent previous year, whichever is higher, shall be taken as the basis for computation of advance tax payable.
  5. The above order can be served by the Assessing Officer at any time during the financial year but not later than the last date of February.
  6. If, after sending the above notice, but before 1st March of the financial year, the assessee furnishes a return relating to any later previous year or an assessment is completed in respect of a later return of income, the Assessing Officer may amend the order for payment of advance tax on the basis of the computation of the income so returned or assessed.
  7. If the assessee feels that his own estimate of advance tax payable would be less than the one sent by the Assessing Officer, he can file estimate of his current income and advance tax payable thereon.
  8. Where the advance tax payable on assessee’s estimation is higher than the tax computed by the Assessing Officer, then, the advance tax shall be paid based upon such higher amount.
  9. In all cases, the tax calculated shall be reduced by the amount of tax deductible at source.
  10.  The amount of advance tax payable by an assessee in the financial year calculated by
    1. the assessee himself based on his estimation of current income; or
    2. the Assessing Officer as a result of an order under section 210(3) or amended order under section 210(4)
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No reduction of ‘tax deductible but not deducted’ while Computation of advance tax

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(i) As per the provisions of section 209, the amount of advance tax payable by a person is computed by reducing the amount of income-tax which would be deductible at source during the financial year from any income which has been taken into account in computing the total income.
(ii) Some courts have opined that in case where the payer pays any amount (on which tax is deductible at source) without deduction of tax at source, the payee shall not be liable to pay advance tax to the extent tax is deductible from such amount.
(iii) With a view to make such a person (payee) liable to pay advance tax, the proviso to section 209(1)(d) provides that the amount of tax deductible at source but not so deducted by the payer shall not be reduced from the income tax liability of the payee for determining his liability to pay advance tax.
(iv) In effect, only if tax has actually been deducted at source, the same can be reduced for computing advance tax liability of the payee. Tax deductible but not so deducted cannot be reduced for computing advance tax liability of the payee.

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