Advance tax and 44AD taxpayers.

Question BankCategory: Income TaxAdvance tax and 44AD taxpayers.
Jasmin asked 9 months ago

As per Section 44AD, advance tax on F&O Turnover @ 6% has to be paid on or before 15th March. What happens to the Turnover between 16th March to 31st March which is not known before 15th March. When does the tax payer pay this & will it attract any penalty?

4 Answers
Test answered 9 months ago

Test

Aditya answered 9 months ago

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Aditya answered 9 months ago

From FY 2016-17 An assessee opting for 44AD/44ADA is required to pay 100% advance tax upto 15th March of the financial year. But in case this due date is missed or in respect of turnover for the period 16th march to 31 march, advance tax can be paid upto 31st March. Hence you can pay advance tax upto 31st March of Financial year. By paying your advance tax upto 31st March you can avoid interest under section 234B but interest under section 234C will be levied as per detail given below.
Consequence for default in payment of Advance tax

  • Interest for default in payment of advance tax (in Total) u/s 234B:- Interest under section 234B is applicable when:
  •  
    • Your tax liability after reducing TDS for the financial year is more than Rs 10,000 and you did not pay any advance tax.   OR
  •  
    • You paid advance tax, but advance tax paid is less than 90% of ‘assessed tax’.

In any one of the above cases, interest under section 234B shall be applicable. Interest is calculated @ 1% on Assessed Tax less Advance Tax. Part of a month is rounded off to a full month. The amount on which interest is calculated is also rounded off in such a way that any fraction of a hundred is ignored. Hence even if you have not paid advance tax upto 15th March but paid advance tax upto 31st March upto minimum 90% of assessed tax then you are not liable to pay interest u/s 234B.

  • Interest for default payment of advance tax in each required instalment and u/s 234B:- Interest under section 234C is levied, if advance tax paid in any instalment(s) is less than the required amount. In other words, interest under section 234C in case of deferment of different instalments of advance tax is levied in following cases:  (A) In case of taxpayers (other than those who opted for presumptive taxation scheme under section 44AD or section 44ADA), interest shall be levied-

l If advance tax paid on or before 15th June is less than 12% of advance tax payable
l If advance tax paid on or before 15th September is less than 36% of advance tax payable
l If advance tax paid on or before 15th December is less than 75% of advance tax payable
l If advance tax paid on or before 15th March is less than 100% of advance tax payable
(B) In case of taxpayers who opted for presumptive taxation scheme of Section 44AD or section 44ADA interest shall be levied if advance tax paid on or before 15th March is less than 100% of advance tax payable.
Note:- 

  • Amount on which percentage of advance tax needs to be calculated = Tax on total income (-) TDS (-) relief u/s 90 or 91 (-) tax credit u/s 115JD.
  • No interest is payable if there is any shortfall in payment of advance tax due, if it is on account of underestimation or failure to estimate amount of capital gains or speculative income (lottery income, gambling income etc).  If it is on account of underestimation or failure to estimate amount of capital gains or speculative income (lottery income, gambling income etc) and if taxpayer has paid in full , the tax payable on the income mentioned above, while paying remaining installments of advance tax due, or if no installment is due, tax payer pays them before the end of the financial year.

The following persons are liable to pay advance tax:-

  • Salaried, professionals and businesses– If your total tax liability after deduction of TDS is Rs 10,000 or more in a financial year then you have to pay advance tax. Senior citizens, who are 60 years or older, and do not run a business, are exempt from paying advance tax.
  • Taxpayers who opted for Presumptive taxation for Businesses and Professionals–The taxpayers who have opted for presumptive taxation scheme under section 44AD /44ADA have to pay the whole amount of their advance tax in one instalment on or before 15 March. They also have an option to pay all of their tax dues by 31 March.

Please further note that some for important points in relation to your question–

  1. Income tax paid upto 31st march of same FY is treated as advance tax. Hence tax paid by taxpayer even after 15th march but upto 31st march is also treated as Advance tax.
  2. Upto FY 2015-16, taxpayers opting for 44AD/ 44ADA were not required to pay advance tax. W.E.F. FY 16-17 taxpayers opting for 44AD / 44ADA are required to pay 100% advance tax in one installment upto 15th March.
Aditya answered 9 months ago

To check due dates of payment of income tax and advance tax for FY 2020-21, Please Click here

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