Advance tax

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ANIL A MALAVADE (Querist)
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17 July 2010 If advance tax is paid on or after 16th of march and before or as on 31st of march will be considered as advance tax ? will it be different for company? and will it be not considered for the calculation of sec234 B and C? its urgent

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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17 July 2010 Dear Anil,

Read the following article. You will get the answer.

In short , anything paid before 31st march will be treated as advance tax, though interest will be applicable under 234B for 1 month.

https://www.caclubindia.com/forum/advance-tax-last-date-15th-march-28046.asp

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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17 July 2010 Agreed, It will be treated as advance tax, But interest will be leived for non-payment of advance tax in time.

If you don’t pay an advance tax instalment in full, you have to pay interest at 1 per cent a month for three months on the amount that falls short of the required payment. However, in the case of default on the last instalment (March 15), the penal interest of 1 per cent is chargeable for only a month.
Let’s illustrate this with an example. Let’s say you are an individual taxpayer and are liable to pay Rs 10,000 by way of advance tax. Suppose you pay Rs 9,500 in three instalments (Rs 3,000 on September 14, Rs 2,000 on December 15, and Rs 4,500 on March 15), would you have kept to your payment schedule?
i. There will have been be no default in respect of the first instalment (Rs 3,000, which is 30 per cent of Rs 10,000).
ii. The second instalment amount should, however, have been Rs 3,000 (60 per cent of Rs 10,000, less Rs 3,000 paid in the first instalment). Hence, the shortfall is Rs 1,000, on which the interest payable is Rs 30 (1 per cent of Rs 1,000 for three months).
iii. Since the third instalment is Rs 4,500, there will have been a shortfall of Rs 500, on which the interest charged would be Rs 5 (1 per cent of Rs 500 for a month).
Thus, you end up with a penal interest of Rs 35 for the year. If in the last month, that is March, you delay payment of the last instalment by even a day, you will have to pay interest on the entire balance of Rs 5,000.

The best strategy for paying advance tax should be to pay a little extra for first 2 installments and then paying amount close to the total tax liability during the third installment. One should also try not to pay extra amount so as to avoid any hassles of refund as is it best to pay nominal interest amount later on.

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