4th Instalment of FY 2018-19 due on 15th March

introduction

As you all are aware, last date for payment of 4th installment of Advance tax is 15th March 2019. In short, Advance tax for FY 2018-19 shall be paid on or before 15th March 2019. Let us understand more about the provisions regarding advance tax.

Applicability of Advance Tax payment

A taxpayer shall pay advance tax only if, the tax payable on total income after considering TDS payment exceeds Rs. 10,000 during the year.

In case of senior citizens not having income from business or profession, advance tax payment is not required even if the tax payable amount exceeds Rs. 10,000.

Applicability of Advance Tax payment

If Advance Tax is not paid, then taxpayer can pay tax at the time of filing of his return, but then he has to pay interest under section 234B and 234C for non-payment of Advance Tax as explained below –

  • Interest under Section 234C

Interest under section 234C is applicable @ 1% per month, if the advance tax is not paid according to the applicable slabs. Total Advance tax should be paid in the following manner:

Payment of Total Advance Tax
Total Advance Tax should be paid in the above manner:

If the tax is not paid as per the given percentage, then interest @1% is payable on the differential amount. (i.e. amount of tax payable less the amount of tax paid)

  • Interest under section 234B

Interest under section 234B is applicable only if, the amount of advance tax is lesser than the 90% of the total tax amount payable. Therefore, If the sufficient funds are not available to pay the advance tax, then at least try to pay 90% of Total Tax as advance tax, so that you can save the interest payment under section 234B.

Taxes paid between 15th March to 31st March

Taxes paid from 15th March to 31st March are also considered as advance tax only, but these payments are ignored at the time of calculating interest under section 234B and Section 234C. This is because, while calculating interest under section 234B and 234C, advance tax paid up to 15th March is only considered. Any payment after that is ignored.

example:Taxpayer paid advance tax in the following manner.

How the Taxpayer has paid Advance tax
How the Taxpayer has paid Advance tax?

Example : Calculation of Interest under Sec 234B and Sec 234C

Suppose, total Advance Tax payable is Rs. 5,00,000 and the tax is paid in the following manner-

Calculation od Interest under Sec 234B and Sec 234C
Calculation od Interest under Sec 234B and Sec 234C

Then, interest under section 234C shall be calculated as:

Interest under section 234C

Interest under Section 234C
Interest under Section 234C

Now, here you can see that, though the advance tax of Rs. 1,50,000 is paid on 28th March, the same has not been considered for the calculation of interest under section 234C.

Interest under section 234B

Now, interest under section 234B is calculated only if total advance tax paid is less than 90% of the total tax payable. Return has been filed on 31st July 2019. Therefore, interest under section 234B shall be calculated for the period from 1st April, 2019 to 31st July 2019. i.e. for 4 months. Therefore, interest payable shall be calculated as,

Interest under Section 234B
Interest under Section 234B

Care to be taken while calculating your Advance Tax

1. Sum up all your taxable income. Don’t forget the following incomes

  • Rental income from house property, if any.
  • Interest on savings exceeding Rs. 10,000.
  • Interest on FDs (Below Rs. 10,000) on which TDS is not deducted.

2. Different Capital Gains are taxed at different tax rates-

  • STCG on Debt Fund is taxed at normal rates.
  • STCG on Equity is taxed @ 15%.
  • LTCG on Equity funds is taxable @10% (Without Indexation).
  • Don’t forget to consider the same.

3. If you have switched your job during the year and the salary from old employer is not disclosed to the new employer, then there are chances that the basic exemption limit of Rs. 2.50 Lakhs / Rs. 3 Lakhs is considered twice. Here your calculations may go wrong. Therefore, consider both the salaries separately.

4. Make sure that, you have completed the 80C investments of Rs. 1.50 Lakhs (like PPF, ELSS, EPF, Sukanya Samriddhi) If not, then complete the investments before 31st March 2019.

5. Take applicable deduction of interest on savings and FD under section 80TTA and 80TTB.

6. Dividend on Shares is taxable, if it exceeds Rs. 10,00,000. If dividend on equity shares is Rs. 11 Lakhs, then Rs. 1 Lakh is taxable. (Dividend up to Rs. 10 Lakhs is tax free)

7. Dividend on Equity MF is fully exempt from tax.

Care to be taken while making payment of Advance Tax

  1. If you are making an online payment, then many banks do not process the online payment on the same date, if paid after 8pm. Therefore, pay the advance tax well before time.
  2. Try to pay the advance tax up to 14th March 2019, to avoid last minute rush.
  3. If you wish to make an offline payment of advance tax, you can approach to your bank with a cheque of the desired amount. Bank will provide you a form for payment of advance tax. Kindly fill that form and pay the taxes.
  4. Fill the tax details correctly. Enter correct Assessment year and correct PAN details.
  5. Remember that, this tax is paid on estimated income, therefore in case you have paid excess advance tax, then you can claim refund in your IT Return.

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