Jigar M. Patel
International Tax Attorney
According to Section 208 of the Income-tax Act, every taxpayer, whose tax liability is Rs.10,000 or more after adjustment of tax deducted at source (TDS) and tax collected at source (TCS), is liable to pay advance tax in prescribed instalments. As we approach the deadline of 15th March (last instalment for payment of advance tax), let us look at some interesting Q&As on the subject.
Freedom from Advance Tax for Senior Citizens?
Query: I am a senior citizen who has annual income of Rs.12 lakhs from bank interest and investment in equity / mutual funds. Am I liable to pay advance tax?
Reply: Under Section 207, resident senior citizens (aged 60 years and above), who do not have any income from ‘business or profession’ are exempted from paying advance tax. Therefore, in your case, since you only have interest and investment income, you will not be required to pay any advance tax. You can pay the requisite amount of taxes at the time of filing your income-tax return.
Advance Tax on Capital Gains, when to be paid?
Query: I sold a piece of land in February 2024, resulting in capital gains of Rs.20 lakhs. I haven’t paid any advance tax on the same in the first three instalments, since the sale took place in the last quarter only. Will I be liable to any interest for the delay in payment of advance tax?
Reply: Section 234C provides for payment of interest by a taxpayer who does not pay or fails to pay on time advance tax in the prescribed percentage and instalments. The taxpayer is liable to pay simple interest calculated at the rate of 1% per month for every quarter on the amount of shortfall.
However, the proviso to Section 234C provides for a welcome relaxation that if the shortfall in advance tax instalment is on account of capital gains or dividends, no interest shall be charged provided the taxpayer has paid balance tax in the subsequent instalments of advance tax. You can therefore compute your advance tax liability for such capital gains and pay the full amount in the last instalment becoming due on March 15.
Salaried Employees liable to Advance Tax?
Query: I am a salaried employee. My employer deducts TDS on my salary and perquisites, comprising of an annual package of Rs.25 lakhs. I also earn taxable interest and dividend of Rs.2 lakhs, on which TDS of Rs.20,000 is deducted. As a salaried employee, am I liable to payment of advance tax?
Reply: Salaried employees generally do not think of paying advance tax, since their employers deduct TDS from their salary. However, it needs to be borne in mind that liability for payment of advance tax is attracted, if the taxpayer has other sources of taxable income and the net tax liability after adjustment of TDS is Rs.10,000 or more during the financial year. In your case, you are in the tax bracket of 31.20% as per which the tax payable on your other income would work to Rs.62,400. After TDS credit of Rs.20,000, you would still be liable to pay Rs.42,400. You can discharge this liability either by sharing this information with your employer and requesting him to deduct this amount by way of TDS from your salary or opt to pay advance tax.
