C.––Advance payment of tax
Liability for payment of advance tax.
403(1)
Advance tax shall be payable during any tax year in respect of the current income of the assesse, as per the provisions of this Part.
403(2)
For the purposes of this Part, “current income” means the total income of the assessee which would be chargeable to tax for that tax year.
403(3)
The provisions of sub-section (1) shall not apply to an individual resident in India, who––
- (a) does not have any income chargeable under the head “Profits and gains of business or profession”; and
- (b) is of the age of sixty years or more at any time during the tax year.
Section Summary:
This section outlines the rules for advance tax payment in India. Advance tax is the income tax paid in installments during the financial year, based on the taxpayer's estimated income for that year. The section specifies who is liable to pay advance tax and provides exceptions for certain individuals.
Key Changes:
- Clarification of "Current Income": The term "current income" is explicitly defined as the total income chargeable to tax for the relevant financial year. This ensures clarity for taxpayers when estimating their advance tax liability.
- Exemption for Senior Citizens: Individuals aged 60 years or older, who do not have income under the head "Profits and gains of business or profession," are exempt from paying advance tax. This is a relief for senior citizens with limited income sources.
Practical Implications:
- For Taxpayers:
- Taxpayers must estimate their annual income and pay advance tax in installments if their tax liability exceeds a specified threshold.
- Senior citizens (60+ years) without business income are not required to pay advance tax, simplifying their tax compliance.
- For Businesses and Professionals:
- Individuals or entities with business or professional income must continue to pay advance tax as per the prescribed schedule.
- For Compliance:
- Taxpayers must ensure accurate estimation of income to avoid penalties for underpayment of advance tax.
Critical Concepts:
- Advance Tax: Tax paid in installments during the financial year, based on estimated income, rather than as a lump sum at the end of the year.
- Current Income: The total income chargeable to tax for the financial year, including salary, business income, capital gains, etc.
- Exemption for Senior Citizens: Applies only to individuals aged 60+ with no business or professional income. Other income types (e.g., interest, rent) do not disqualify them from this exemption.
Compliance Steps:
- Estimate Income: Calculate your expected total income for the financial year, including all heads of income.
- Determine Tax Liability: Compute the tax payable on the estimated income, considering applicable deductions and exemptions.
- Pay Advance Tax: If the tax liability exceeds the threshold (₹10,000 for most taxpayers), pay advance tax in installments as per the due dates:
- 15% by June 15,
- 45% by September 15,
- 75% by December 15,
- 100% by March 15.
- File Returns: Ensure accurate reporting of advance tax payments in the income tax return.
Examples:
Scenario 1: Business Owner
- Mr. A, aged 50, runs a business with an estimated annual income of ₹20 lakh. His tax liability is ₹4 lakh. He must pay advance tax in four installments: ₹60,000 by June 15, ₹1.8 lakh by September 15, ₹3 lakh by December 15, and ₹4 lakh by March 15.
Scenario 2: Senior Citizen with Rental Income
- Mrs. B, aged 65, earns ₹8 lakh annually from rental income and has no business income. She is exempt from paying advance tax under Section 403(3).
Scenario 3: Senior Citizen with Business Income
- Mr. C, aged 62, earns ₹12 lakh annually from a consultancy business. Despite being a senior citizen, he must pay advance tax because he has income under the head "Profits and gains of business or profession."
This section ensures that taxpayers meet their tax obligations throughout the year while providing relief to senior citizens with limited income sources.