Instalments of

advance tax and due dates.

408(1)

All the assessees who are liable to pay advance tax, other than the assessee referred to in sub-section (2), shall pay the same on the current income calculated in the manner laid down in section 405 in four instalments during each tax year and the due date of each instalment and the amount of such instalment shall be as specified in the Table below. ---table---

408(2)

An assessee, who declares profits and gains as per the provisions of section 58(2) (Table: Sl. No. 1 or 3), shall pay the whole amount of advance tax on the current income, calculated in the manner laid down in section 405 during each tax year, on or before the 15th March.

408(3)

Any amount paid by way of advance tax on or before the 31st March, shall be treated as advance tax paid during the tax year ending on that day for all the purposes of this Act.

Explanation

Section Summary:

This section outlines the rules for paying advance tax in instalments and specifies the due dates for such payments. It applies to taxpayers who are required to pay advance tax, except for those covered under sub-section (2). The section also clarifies that any advance tax paid by March 31st will be considered as paid within the relevant tax year.

Key Changes:

1. Instalment Structure: The section introduces a four-instalment system for advance tax payments, replacing any previous instalment structure.
2. Special Provision for Certain Assessees: Sub-section (2) specifies that taxpayers declaring profits and gains under specific provisions (Section 58(2), such as those opting for presumptive taxation, must pay the entire advance tax by March 15th.
3. Clarification on March 31st Payments: Sub-section (3) clarifies that any advance tax paid by March 31st is treated as paid within the tax year, ensuring no ambiguity in timing.

Practical Implications:

1. For Regular Taxpayers: Taxpayers must calculate their advance tax liability based on their current income and pay it in four instalments as per the specified due dates. Missing deadlines may attract interest under Section 234B and 234C.
2. For Presumptive Taxpayers: Taxpayers opting for presumptive taxation under Section 58(2) must pay their entire advance tax liability by March 15th, simplifying their payment schedule but requiring careful planning to avoid penalties.
3. Cash Flow Management: Businesses and individuals need to plan their cash flows to meet the instalment deadlines, especially if their income is unevenly distributed throughout the year.

Critical Concepts:

1. Advance Tax: Tax paid in advance on estimated income for the year, rather than at the end of the year.
2. Current Income: Income estimated for the current tax year, calculated as per Section 405.
3. Presumptive Taxation: A simplified taxation scheme where income is presumed based on turnover or receipts, reducing the need for detailed bookkeeping.

Compliance Steps:

1. Estimate Income: Calculate current income for the year as per Section 405.
2. Determine Instalment Amounts: Use the table provided in the section to determine the amount and due dates for each instalment.
3. Pay Instalments: Ensure payments are made by the due dates:
   • For regular taxpayers: Four instalments as per the table.
   • For presumptive taxpayers: Full payment by March 15th.
4. Record Payments: Maintain proof of payment for compliance and audit purposes.

Examples:

1. Regular Taxpayer: A business estimates its annual income at ₹20 lakhs. As per the table, it pays ₹30,000 by June 15th, ₹60,000 by September 15th, ₹60,000 by December 15th, and the remaining ₹50,000 by March 15th.
2. Presumptive Taxpayer: A small business opts for presumptive taxation under Section 58(2) and estimates its income at ₹10 lakhs. It pays the entire advance tax of ₹30,000 by March 15th.

This section ensures timely collection of taxes and reduces the burden of lump-sum payments at the year-end, while also providing clarity for taxpayers under presumptive taxation schemes.