Introduction
The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.
Rates for deduct of tax at source
Taxes shall be deducted at the rates specified in the relevant provisions of the Act or the First Schedule to the Finance Act. However, in case of payment to non-resident persons, the withholding tax rates specified under the Double Taxation Avoidance Agreements shall also be considered.
How to pay Tax Deducted/Collected at source?
Tax deducted or collected at source shall be deposited to the credit of the Central Government by following modes:
1) Electronic mode: E-Payment is mandatory for
a) All corporate assesses; and
b) All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
2) Physical Mode: By furnishing the Challan 281 in the authorized bank branch
Note:-
Where tax is deducted/collected by government office, it can remit tax to the Central Government without production of income-tax challan. In such case, the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person by whatever name called to whom the deductor reports the tax so deducted and who is responsible for crediting such sum to the credit of the Central Government, shall submit a statement in Form No. 24G.to NSDL with prescribed time-limit.
What is it?
As the name suggests, advance tax refers to paying a part of your taxes before the end of the financial year. Also called ‘pay-as-you-earn’ scheme, advance tax is the income tax payable if your tax liability is more than Rs 10,000 in a financial year. It should be paid in the year in which the income is received. By paying in advance, you help the government and also yourself by not finding it hard to pay the whole tax at one go at the end. This way, if your advance tax liability for the financial year 2017-18 has exceeded Rs 10,000, you are expected to pay it in the same financial year.
The deadlines are: at least 15 per cent of the liability on or before June 15, 45 per cent by September 15, not less than 75 per cent by December 15 and the whole amount of the tax calculated, by March 15 of each financial year. If the estimate of one’s income changes as the instalments progress, the advance tax payable can be increased or reduced accordingly. Any amount paid up to March 31 will also be accepted as advance tax for that financial year.
Payment of advance tax: Self-employed and businessmen
Due date of instalment | Amount payable |
On or before 15th September | Not less than 30% of the advance tax liability |
On or before 15th December | Not less than 60% of the advance tax liability |
On or before 15th March | 100% of the advance tax liability |
Payment of advance tax: Companies
Due date of instalment | Amount payable |
On or before 15th June | Not less than 15% of the advance tax liability |
On or before 15th September | Not less than 45% of the advance tax liability |
On or before 15th December | Not less than 75% of the advance tax liability |
On or before 15th March | 100% of the advance tax liability |
So, if you are a salaried employee, you need not pay advance tax as your employer deducts tax at source (TDS). Advance tax is applicable when an individual has sources of income other than his salary. For instance, if an assessee earns income via capital gains on shares, interest on fixed deposits, winnings from lottery or races, capital gains on house property besides his regular business or salaried income then after adjusting for expenses or losses he needs to pay advance tax. Even if you are salaried, the advance tax is payable even by salaried employees on their other income.
While employers deduct TDS on salaries, advance tax is paid on income that is not subject to TDS. Professionals (self-employed) and businessmen will have to pay taxes in advance as, given their business income, the liability can be huge. The same implies for companies and corporates.
How to file Advance Tax?
Individuals may pay advance tax using tax payment challans at bank branches authorised by the Income Tax (I-T) Department. It can be deposited with the Reserve Bank of India and all the other authorised banks. There are 926 branches in India that can accept advance tax payments. Individuals may also pay it online through the I-T department or the National Securities Depository.
Do not worry if you miss the deadline, because if you fail to pay or the amount you’ve paid is less than the mandated 30% of the total liability by the first deadline (15 September), you will need to pay an interest. This is computed @ 1% simple interest per month on the defaulted amount for three months. The same interest penalty would apply if you fail to pay the second deadline (15 December). Failing to pay the third and last deadline (15 March) would mean paying 1% simple interest on the defaulted amount for every month until the tax is fully paid
And in case you land up paying a higher advance tax than you ought to, you will receive the excess amount as a refund. Interest @ 6% per annum will be paid by the Income Tax department to the assessee on the excess amount if the amount is more than 10% of tax liability.
Try to treat advance tax as an EMI to the tax department, which eventually helps you pay your income tax without being stressed about it. Likewise, use the payment of advance tax as an opportunity to stay a step ahead of your tax liabilities, so that you are not left worrying over how much you owe to the tax department at the end of the year, you also save yourself from paying penalties for not paying the taxes in advance. Moreover, you could contribute in your own small way towards nation building even as the government receives the advance tax money from you, which in turn is used towards infrastructure development of the country.
Every assessee, who earns income beyond the basic exemption limit in a Financial Year (FY), must file a statement containing details of his income, deductions, and other related information. This is called the Income Tax Return (ITR). Once you as a taxpayer file the income returns, the Income Tax Department will process it. There are occasions where, based on set parameters by the Central Board of Direct Taxes (CBDT), the return of an assessee gets picked for an assessment.
The various forms of assessment are as follows:
1. Self Assessment
The assessee himself determines the income tax payable. The tax department has made available various forms for filing income tax return. The assessee consolidates his income from various sources and adjusts the same against losses or deductions or various exemptions if any, available to him during the year. The total income of the assessee is then arrived at. The assessee reduces the TDS and Advance Tax from that amount to determine the tax payable on such income. Tax, if still payable by him, is called self assessment tax and must be paid by him before he files his return of income. This process is known as Self Assessment.
2. Summary Assessment
It is a type of assessment carried out without any human intervention. In this type of assessment, the information submitted by the assessee in his return of income is cross-checked against the information that the income tax department has access to. In the process, the reasonableness and correctness of the return are verified by the department. The return gets processed online, and adjustment for arithmetical errors, incorrect claims, and disallowances are automatically done. Example, credit for TDS claimed by the taxpayer is found to be higher than what is available against his PAN as per department records. Making an adjustment in this regard can increase the tax liability of the taxpayer.
After making the aforementioned adjustments, if the assessee is required to pay tax, he will be sent an intimation under Section 143(1). The assessee must respond to this intimation accordingly. Here you can read a more detailed article on Section 143(1).
3. Regular Assessment
The income tax department authorizes the Assessing Officer or Income Tax authority, not below the rank of an income tax officer, to conduct this assessment. The purpose is to ensure that the assessee has neither understated his income or overstated any expense or loss or underpaid any tax.
The CBDT has set certain parameters based on which a taxpayer’s case gets picked for a scrutiny assessment.
a. If an assessee is subject to a scrutiny assessment, the Department will send a notice well in advance. However, such notice cannot be served after the expiry of 6 months from the end of the Financial year, in which return is filed.
b. The assessee will be asked to produce the books of accounts, and other evidence to validate the income he has stated in his return. After verifying all the details available, the assessing officer passes an order either confirming the return of income filed or makes additions. This raises an income tax demand, which the assessee must respond to accordingly.
4. Best Judgement Assessment
This assessment gets invoked in the following scenarios:
a. If the assessee fails to respond to a notice issued by the department instructs him to produce certain information or books of accounts
b. If he/she fails to comply with a Special Audit ordered by the Income tax authorities
c. The assessee fails to file the return within due date or such extended time limit as allowed by the CBDT
d. The assessee fails to comply with the terms as contained in the notice issued under Summary Assessment
After providing an opportunity to hear the assessee’s argument, the assessing officer passes an order based on all the relevant materials and evidence available to him. This is known as Best Judgement Assessment.
5. Income Escaping Assessment
When the assessing officer has sufficient reasons to believe that any taxable income has escaped assessment, he has the authority to assess or reassess the assessee’s income. The time limit for issuing a notice to reopen an assessment is 4 years from the end of the relevant assessment Year. Some scenarios where reassessment gets triggered are given below.
a. The assessee has taxable income but has not yet filed his return.
b. The assessee, after filing the income tax return, is found to have either understated his income or claimed excess allowances or deductions.
c. The assessee has failed to furnish reports on international transactions, where he is required to do so.
Key takeaways:
Income Tax Authority -Their Appointment, Jurisdiction ND Powers
Explanation to the tax Authority [section 133A (a)]:
"Income tax authority" means a commissioner, Co-commissioner, director, co-director, assistant director or deputy director or evaluator, or taxman , for the needs of subsection(1)section(I), subsection(3)and subsection(5)section(I). This includes the inspector of tax.
1.1. Various institutions
The tax Act of 1987 led to significant changes within the organizational structure. The implementation of this act is within the hands of those authorities. The change within the designation of certain authorities and therefore the creation of certain new posts within the structure are the most features of the amendment by the tax Act of 1987. The new functions of the authorities are properly drawn on the chart of the facing page. Two main wings for these authorities:
(I) administrative [income tax authorities] [Section 116]
(Cca) co-director of tax or co-commissioner of tax.
Deputy director of tax or Deputy Commissioner of tax or Deputy Commissioner of tax (appeal),
e. Assistant director of tax or Assistant Commissioner of tax ,
f. Income tax officer,
g. Tax inspector,
h. Income tax inspectors.
(II) Evaluator [Sec.2 (7A)])]
"Evaluator “means a vice-chairperson or vice-chairperson or vice-chairperson or tax officer with relevant jurisdiction by an instruction or order issued under Paragraph 1 or 2 of this act under paragraph 120 or other provisions, and a co-chairperson or co-chairperson as directed under Paragraph(B)of Paragraph 4, which can be granted or assigned to an evaluator under this act. This suggests that you simply will exercise or perform all or any of the rights and functions provided by you.
Importance of Officer Evaluation:
In the organizational setting of the tax Department, assessing officers plays a really important role. He’s the first authority that initiates his proceedings and is directly connected with the general public. Form the time of filing a return until the assessment is completed he plays a pivotal role. He can start such procedures as non-declaration, imposition of penalties. Orders also are possible. The department can amend his order only by the commissioner of tax, if it's proven that there's a negative impact on the income.
(III) Appointment of tax authorities [Sec.117]
(IV) Control of tax authorities [Sec.118]
The board may, by notification of the Official Gazette, instruct the tax Authority or authority laid out in the notice to be subordinate to the opposite tax authority or authority laid out in such notice.
For the purposes of this law, there shall be the following income tax authorities:
(1) For the needs of this law, there shall be the subsequent tax authorities:—
(a) Central Revenue Committee,
[(A) i s inspection,]
(b) Tax commissioner,
(C) To look at the Assistant Commissioner of tax appeal or the Assistant Commissioner of tax could also be either the Assistant Commissioner of tax
(d) Tax officer,
(e) Tax inspectors
[(1A) the central government may appoint as many inspection directors because it deems appropriate, and therefore the inspection Directors shall be under the control of the Central Revenue Committee and shall perform such functions of other tax authorities assigned by the central government.]
[(2) the central government may appoint as many tax commissioners because it deems appropriate, as could also be dictated by the central Income Commission of such region or person of such person or class or case of such income or class or case of such case or class if such instructions are assigned to the commissioners of income or class income or class income or class income or class income or class tax within the same region or an equivalent person or class, they shall have concurrent jurisdiction in accordance with the orders that the central Income Commission may perform for the allocation and allocation of the work performed to be.
(3) the central government may appoint as many because it deems appropriate tax officers and appeals or inspectors of tax officers serving class I, and therefore the commissioners could also be authorized by the central government at any time as tax officers serving Class II and tax inspectors, in accordance with the principles and orders of the central government regulating the terms of service of persons publicly services and posts could also be appointed.
(3A) in accordance with the principles and orders of the central government regulating the terms of service of persons publicly services and posts, the tax Authority may appoint such executive or ministerial staff as could also be necessary to help within the performance of its functions.]
(4)income tax appeal the assistant commissioner shall be under the direct control of the central Income Commission and shall perform its functions with reference to such person or class of persons[or of such income or class of income]with reference to such area as could also be indicated by the central Income Commission[and such instructions shall be in two if one or more appeals are assigned to the Assistant Commissioner, an equivalent person or person class or an equivalent income or income class or an equivalent area]in accordance with any order that the central Income Commission may bring the allocation and allocation of labor to be performed.
(5) the inspection assistant of the tax and tax Officer shall perform its functions with reference to such person or class of persons[or of such income or class of persons]may instruct in respect of areas like the tax officer[and, if such instruction is assigned to 2 or more inspection assistants of the tax or tax officer, such person or class the tax Commissioner shall fulfil its function with reference to the category , class of an equivalent person or person or class of an equivalent income or class of income or an equivalent area]in accordance with any order that the tax Commissioner may bring the distribution and distribution of labor performed. The commissioner shall, by written General or special order, have the proper granted to the tax officer and therefore the appellate aide by or under this law, and any regard to the tax officer and therefore the reform the appellate aide during this law or the principles made herein shall be deemed to be a regard to the inspector aide and the commissioner, respectively. it is not.
[(5A) the tax inspector shall, within the execution of this act, perform the functions assigned by the tax officer or the tax Authority appointed there under, and shall not be liable for such acts.]
(6) the Central Revenue Committee May, through a notice within the Official Gazette, empower the tax Commissioner, appellate or inspection assistant and tax officer to perform such functions with reference to the income classification [or region] specified within the notice, in order that the required functions could also be assigned by other authorities appointed under (2) and (3) to the income classification [or region] identified.
[(7) For the needs of this law,—
(I) the inspection assistant commissioner shall be subordinate to the director of the inspection and therefore the tax Commissioner within its jurisdiction once they perform their functions.
[(7A) the commissioner of tax may transfer any case from one tax officer to a different that's subordinate to him, and the Central Committee of revenue may transfer any case from one tax officer to a different. Such a transfer is often made at any stage of the proceedings and doesn't require the reissue of the notice already issued by the tax officer to whom the case was transferred.]
Key takeaways:
References:
