UNIT VI

Tax Deduction at Source, Advance Tax & Interest Payable

6.1 Basic Aspects of Deduction of Taxes at Source

Sec 192- TDS on Salary

Section 192 of the Income Tax Act, 1961 deals with tax deducted at source (TDS) on salary. Your employer will deduct TDS from the salary payable to you. The salary you receive from your employer is categorised in ‘Income’ under the head ‘Salary’ and he/she will be responsible for deducting TDS on an average rate of income tax based on the current slab rate during the relevant financial year by considering your estimated income.

The TDS deducted u/s 192 is reflected in Form 16, which is issued by the taxpayer at the end of the financial year.

Who can Deduct TDS under section 192

These employers include:

1. Companies (Private or Public)
2. Individuals
3. HUF
4. Trusts
5. Partnership firms
6. Co-operative societies

All these employers are required to deduct TDS at a specific time period and deposit it to the government.

According to section 192 of the income tax act, there must be an employer-employee relationship for the deduction of tax at source.

The employer’s status such as HUF, firms or company is irrelevant for the deduction of tax at source under this section. Moreover, the number of employees employed by the employer does not matter while calculating and deducting TDS.

When is TDS Deducted under section 192

Under Section 192, TDS is deducted at the time of actual payment of salary and not during the accrual of salary. Tax will also be deducted if your employer pays salary in advance to you or you receive arrears from him.

In case your estimated salary is not more than the basic exemption limit, TDS will not be deducted. This rule is applicable even to those who do not have a PAN.

The table below shows the basic exemption limit as per the age that does not require TDS to be deducted:

Age         Minimum income

Resident in India below 60 years     Rs 2.5 lakh

Senior Citizens between 60 years and below 80 years   Rs 3 lakh

Super Senior Citizens above 80 years     Rs 5 lakh

Time limit to deposit the tax under section 192

If the TDS is deducted by any government employer – It has to be deposited on the same day.

If the TDS is deducted by any employer other than the government –

a. If the salary is credited and TDS is deducted in the month of March – On or before 30 April

b. If the salary is credited and TDS is deducted in any month other than March- Within seven days from the end of the month in which the deduction is made.

Sec 194A- TDS on Interest

What is Section 194A?

Section 194A deals with deduction of TDS on interest other than interest on securities like Interest on Fixed Deposits, Interest on Loans and Advances other than banks.

This Section is only applicable to a resident. Thus, the provisions of section 194A are not applicable in case of payment of interest to a non-resident.

Payments made to non-residents are also covered under TDS mechanism. However, tax in such a case is to be deducted as per Section 195.

When does TDS under Section 194A need to be deducted?

The Payer/Deductor shall deduct TDS if the amount of such interest paid or credited OR is likely to be paid or credited in a financial year,

1. Exceed 40,000 where the payer is

• Banking company or any bank or a banking institution
• Co-operative society engaged in the business of banking
• Post office (on deposit under scheme framed and notified by Central Government).

b.     5,000 in any other case.

From FY 2018-19 onwards no TDS will be deducted on interest earned upto INR 50,000 by senior citizens. The interest amount should be earned from the following:

• Deposits with banks;
• Deposits with post offices
• Fixed deposit schemes
• Recurring deposit schemes

When is Tax deducted at NIL rate or lower rate?

This happens under the following scenarios:

1. When a declaration is submitted in form 15G/15H u/s 197A If a declaration is submitted under Section 197A by the recipient to the payer along with his/her PAN, then no tax is deductible if the following conditions are satisfied:

• Recipient is a person other than a company OR firm
• Tax on total income of the previous year (PY) is NIL
• Total income does not exceed the exemption limit (i.e. for AY 2020-21, Rs.2,50,000 or Rs.3,00,000 or Rs.5,00,000, as applicable). This condition is NOT applicable if the recipient is a resident senior citizen.
• Such a declaration shall be given in duplicate form 15G (15H for senior citizens). In case of Senior Citizens Saving Scheme, 2004 (SCSS), investors can submit the declaration.
• Nominees of investors of SCSS can also produce the declaration at the time of payment after the death of the depositor.
• On submission of declaration to the bank, bank shall not deduct tax (subject to the conditions) on payment of interest.

2.     When an application is submitted in Form 13 under Section 197

• As per provisions of Section 197, the recipient can apply in Form no.13 to the Assessing Officer to get a certificate authorizing the payer to deduct tax at lower rate (or deduct no tax, if certain conditions are satisfied).
• There is no time limit for application and it can be filed at any time before actual deduction of tax. If the recipient does not have PAN, he cannot apply for the certificate.
• The certificate shall be issued, directly to the person responsible for paying income, on a plain paper, under an advice to the applicant.
• The certificate cannot be issued with retrospective effect.
• The recipient may furnish copy of such certificate to the person responsible for paying the income for lower/no deduction of tax at source.

What is the rate of TDS?

Following are the applicable rates of taxes:

10% when the PAN is furnished (the rate is 7.5% for interest credited from 14 May 2020 until 31 March 2021 as a COVID-19 relief measure);

20% if the PAN is not provided.

No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.

What is the time limit for depositing TDS ?

Tax Deducted during the month of April to February is to be deposited on or before the 7th of next month. Tax Deducted in the month of March is to be deposited on or before 30th April.

For example, tax deducted on 25 April is to be deposited on or before 7th May and tax deducted on 15 March is to be deposited on or before 30 April.

Sec 194C- TDS on Contractor

What is Section 194C?

Section 194C states that any person responsible for paying any sum to the resident contractor for carrying out any work (including the supply of labor), in pursuance of a contract between the contractor and the following:

a. The Central Government or any State Government

b. Any local authority

c. Any corporation established by or under a Central, State or Provisional Act

d. Any company

e. Any co-operative society

f. Any authority constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the needs for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both

g. Any society registered under the Society Registration Act, 1980 or under any such corresponding law to the Act in any Part of India

h. Any trust

i. Any university or deemed university

j. Any firm

What is the meaning of work for the purpose of Section 194C?

The expression, “work” in this section would include-

a. Advertising

b. Broadcasting and telecasting including production of programs for such broadcasting or telecasting

c. Carriage of goods and passengers by any mode of transportation, other than railways

d. Catering

e. Manufacturing or supplying of a product according to the requirement or specification of a customer by using the materials purchased from such customer or its associate as defined in section 40A(2), But does not include manufacturing or supplying of a product according to the requirements or specifications of a customer by using the materials purchased from a person, other than such a customer.

What is a Sub-Contractor as per Section 194C?

A “sub-contractor” would mean any person:

a. Who enters into a contract with the contractor for carrying out, or

b. For the supply of labor for carrying out the whole or part of the work undertaken by the contractor under a contract with any of the authorities or

c. For the supply of, whether wholly or partly, any labor which the contractor has undertaken to supply in terms of his contract with any of the authorities mentioned under this section.

What is TDS to Sub-Contractor?

As per the provisions of Income Tax Act, any person (being a contractor and not being an individual or a Hindu Undivided Family):

a. Responsible for paying any sum to any resident

b. In pursuance of a contract with the sub-contractor for carrying out, or for the supply of labor for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labor which the contractor has undertaken to supply shall,

i. At the time of credit of such sum to the account of the sub-contractor or

Ii. At the time of payment thereof in cash or

Iii. By the issue of a cheque or draft or by any other mode, whichever is earlier

c. Deduct the amount equal to 1 % of the sum as income-tax on income comprised therein. The rate is 0.75% for transactions from 14 May 2020 until 31 March 2021.

Where is the Payment made to Sub-contractors, what Conditions must be Satisfied?

a. Payment is made to a sub-contractor who is resident within the meaning of Section 6 of the Income Tax Act, 1961

b. Payment is made by a resident contractor, not being an individual or a HUF

c. Payment is made to carry out any work, including the supply of labor

d. The amount of consideration of the contract in respect to which payment is made should not be less than Rs. 30,000

e. The sum should be credited or paid by the contractor in respect of a contract undertaken by him with the specified bodies

When does TDS under Section 194C need to be deducted?

The person responsible for making payment to resident contractor/sub-contractor should deduct TDS,

a. Either at the time of crediting such sum to the account to the payee or

b. At the time of payment thereof in cash or

c. By an issue of a cheque or by any other mode, whichever is earlier.

Where any sum is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such amount, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. Thus, the tax has to be deducted even if the amount payable to resident contractor/subcontractor is transferred to suspense account by the payer in his books.

What are the Exceptions to TDS on Payment to Contractor?

A. Deduction of TDS in case of composite contract

i. Where materials are supplied by the government, the question is whether deduction will be made with reference to gross payment to the contractor or the net payment, i.e., gross payment minus deductions, if any,

Ii. On account of materials supplied by the government, will have to be decided in the light of the terms of the particular contract and the conduct of parties thereto.

Iii. Where the contractor has undertaken to construct a building or a dam, and the government or other specified person has undertaken to supply all or any of the materials necessary for the work at the stipulated prices, the deduction will be related to the gross payment without excluding any adjustments on account of the cost of materials.

Iv. Where the contractor has undertaken only to provide the labour for the work, the ownership of the materials supplied remaining at all times with the government or another specified person, the sum payable to the contractor in respect of the contract will only be the amount paid for such labour or services and will, thus, not include the price of the materials supplied by the government or other specified persons.

Thus, the rate of TDS from payments made by the government or other specified persons to any contractor will be 2% or 1% of the gross payment or, as the case may be, the net payment, depending on the terms of the contract. The rate is 1.5% or 0.75% for transactions from 14 May 2020 until 31 March 2021.

B. Deduction, when the party supplies materials to the contractor

i. When materials are supplied no deduction is possible. Consequently, no TDS is required to be made. However, when payment is made either in cash or in kind to contractor/sub-contractor tax is required to be deducted.

Under what circumstances TDS u/s 194C is not deductible?

No tax is required to be deducted in the following cases:

a. Where the sum paid or credited in pursuance of any contract does not exceed Rs. 30,000, or b. Where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year does not exceed Rs. 1,00,000 the person responsible for paying such sums will not deduct TDS under this section c. Individual or HUF not to deduct tax if the payment or amount credited to the contractor is for personal use

i. No individual or HUF shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for the personal purpose of such individual or any member of HUF

Ii. No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his PAN, to the person paying or crediting such amount

Time Limit within which Tax is to be Deposited

a.  Where the payment is made by or on behalf of the Government – On the same day.

b.  Where the payment is made in any other case than the government

i. If the amount is credited in the month of March – On or before April 30th

Ii. In Other months – Within 7 days from the end of the month in which the deduction is made.

Sec 194H- TDS on Commission

What is Section 194H?

Section 194H is for income tax deducted on any income by way of commission or brokerage, by any person responsible for paying to a resident.

Individuals and Hindu Undivided Family who were covered under section 44AB are also required to deduct TDS. From FY 2020-21, individual and HUF whose turnover from business is above Rs 1 crore or gross recipts from profession are above Rs 50 lakh are also required to deduct TDS.

Section 194H does not include insurance commission referred to in section 194D.

When does TDS under Section 194H need to be deducted?

TDS under Section 194H will be deducted at the time of credit of such income to the account of the payee or to any other account.

Whether called suspense account or by any other name at the time of payment, of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier.

What do you mean by Commission and Brokerage?

Commission or brokerage includes any payment

• Received or receivable,
• Directly or indirectly, OR
• By a person acting on behalf of another person

TDS on commission or brokerage includes,

• For services rendered (not being professional services), or
• For any services in the course of buying or selling of goods, or
• In relation to any transaction relating to any asset, valuable article or thing, except securities

Exceptions to Commission/Brokerage

People are under the presumption that Presumptive Taxation is applicable to Income from the commission but technically it is not correct.

What is the rate of TDS?

The rate of TDS is 5%. The rate is 3.75% for transactions from 14 May 2020 until 31 March 2021.

No surcharge, education cess or SHEC shall be added to the above rates. Hence, the tax will be deducted at source at the basic rate.

The rate of TDS will be 20% in all cases if PAN is NOT quoted by the deductee.

Under what circumstances TDS u/s 194H is not deductible?

No deduction shall be made under this section in a case where the amount or the aggregate amounts of such income to be credited or paid during the financial year does not exceed INR 15,000

The Person can make an application to the assessing officer under section 197 for deduction of tax at NIL rate or at a lower rate.

What is the time limit on depositing TDS ?

Tax Deducted during the month of April to February is to be deposited on or before the 7th of next month. Tax Deducted in the month of March is to be deposited on or before 30th April.

For example, tax deducted on 25 April is to be deposited on or before 7th May and tax deducted on 15 march is to be deposited on or before 30 April.

TDS at a Lower Rate

The deductee (the person whose tax is deducted) can make an application to the assessing officer under section 197 for deduction of tax at NIL rate or at a lower rate.

Actions to be taken by deductor:

• Validate the PAN of the deductee submitting 197 certificate.
• The Certificate should be valid for the PAN, Section, Rate and relevant financial year which has been mentioned in the statement filed.
• Verify that the threshold limit for the certificate has not been exceeded in previous quarters.
• Correct certificate number should be quoted in the statement.

Sec 194I- TDS on Rent

What is Section 194I?

The person (not being an Individual or HUF) who is responsible for paying of rent is liable to deduct tax at source.

TDS threshold for deduction of tax on rent is Rs 2,40,000 for the FY 2020-21. The threshold limit was Rs. 1,80,000 until FY 2018-19.

Also, individuals and/or HUFs who are subject to tax audit are also under an obligation to deduct the tax at source.

What is the Reason for Introduction of TDS u/s 194I?

The Finance Act, 1994 inserted the Section 194I, regarding deduction of tax from rent

The government introduced the provision to cover the income by way of rent under tax deduction at source

In other countries as well, such income is subject to deduction of income tax at source

What is the Meaning of ‘Rent’ in reference to Section 194I?

‘Rent’ means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any:

1. Land or
2. Building (including factory building) or
3. Land appurtenant to a building (including factory building) or
4. Machinery or
5. Plant or
6. Equipment or
7. Furniture or
8. Fittings

Whether or not any or all of the above are owned by the payee (Explanation (i) to Sec. 194-I). Sub-letting is also covered.

If the landlord collects security or advance payment at the time of letting out a building to a tenant on the condition that the deposit will be refunded at the time of vacating the building, then such a receipt is not in the nature of income and, therefore, no tax is to be deducted at source u/s 194I.

However, advance rent (not in the nature of refundable security deposit) paid is, subject to a tax deduction. Moreover, where any such rent is credited to ‘suspense account’ or to any other account shall also be liable to deduct tax at source.

What Payment is Covered u/s 194I?

Income from letting out of factory building

Where a factory building is let out, the rent received generally is income from business in the hands of the lessor or the owner of the factory. Only in a few cases, it is income from property in the lessor’s hands.

But such payment also, which is business income in the hands of the lessor and for which he will necessarily be paying advance tax and finally be returning the rental income, will be subject to tax deduction at source or TDS.

This is an unnecessary burden on both taxpayer and the tax administrator because the collection of tax will take place as TDS from the lessor without much delay.

Rent includes service charges

Service charges payable to business centres are covered under the definition of rent, as they cover payments by whatever named called.

TDS requirement where building and furniture, etc., let out by separate persons

In the case where a building is let out by one person and furniture and fixtures are let out by another person, then the payee is required to deduct tax under Sec. 194I only from the rent paid/credited for the hire of building.

TDS requirement where rent not payable on monthly basis

Sec. 194I does not mandate that the tax deduction should be made on a month-to-month basis.

Therefore, if the crediting of the rent is done on a quarterly basis, the deduction at source will have to be made on a quarterly basis only. Where the rent is paid on a yearly basis, deduction also will have to be made once a year on the basis of the actual payment or credit.

Charges regarding cold storage facility

In the case of cold storage where milk, ice cream, and vegetables, are stored, the payment may be styled as charges for use of plant and not for use of the building. Cold storage is a plant.

Hall rent paid by an association for use of it

Since the association is assessed as an association of persons and not as an individual or HUF, the obligation of tax deduction will be there, provided payment for the use of hall exceeds Rs.2,40,000 from FY 2019-20 onwards (earlier it was Rs.1,80,000).

Payments to hotels for holding seminars including lunch

Where hotels do not charge for use of premises but charge for catering/meal only, the provisions of Sec. 194I would not apply. However, Sec.194C would apply for catering part.

Who is Liable to Deduct TDS u/s 194I?

The person (not being an Individual or HUF) who is responsible for paying any income to a resident by way of rent is liable to deduct tax at source.

As per Budget 2017, individual /HUF (not covered under tax audit) paying rent to a resident exceeding Rs.50,000 per month are also liable to deduct TDS @ 5%. This amendment will be effective from 1 June 2017.

In case the aggregate of the amount of such income credited/paid or likely to be credited/paid during the financial year by the aforesaid person to the account of or to the payee exceeds Rs.2,40,000. The limit was Rs 1,80,000 until FY 2018-19.

What is the Point of Deduction of TDS?

Tax is required to be deducted at source at the time of credit of ‘income by way of rent’ to the account of the payee or at the time of payment, thereof, in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier.

Under what circumstances TDS u/s 194I is not deductible?

Amount payable/paid not exceeding Rs.2,40,000 during the financial year: No tax is required to be deducted in case the amount of rent due or paid does not exceed Rs.2,40,000 from FY 2019-20 onwards (earlier it was Rs.1,80,000).

Where tenant is individual or Hindu Undivided Family:

Deduction is not required under Sec. 194I when the rent is due or paid by an Individual or HUF not carrying on a business which is audited under income tax law.

Sharing or proceeds of film exhibition between a film distributor and a film exhibitor owning a cinema theatre:

In case of a film exhibitor and film distributor contract, the share of the exhibitor is on account of composite services. The distributor does not take cinema building on lease or sub-lease or tenancy or under an agreement of similar nature. The payment made is not rental in nature.

Where the payee is the Government at agency:

A person making payment to Government is not required to deduct tax at source under Section 194-I. The payments made to statutory authorities and local authorities are exempt from tax and hence not tax deductible.

What is the time limit on depositing TDS?

• Where the payment is made by or on behalf of the Government- On the same day (without using any challan form)
• Where the payment is made in any other case than the Government- On or before 7 days from end of month in which deduction is made, where tax is paid accompanied by an Income tax challan
• If the amount is credited or paid in the month of March- On or before April 30
• In any other case- On or before 7 days from the end of the month in which the deduction is made.

Consequences of non-deduction/non-payment of TDS

A taxpayer who is liable to deduct TDS will be liable to pay interest @ 1% per month from the date when tax is deductible till the date when tax is deducted.

A taxpayer who has deducted tax but not deposited the same to the government is liable to pay interest @ 1.5% per month from the date when tax is deducted to the date of deposit of the TDS.

Sec 194J- TDS on Professional fees

What is section 194J under the Income Tax Act?

Section 194J stated that any person who is paying fees to any resident person for specified services, then TDS is required to be deducted u/s 194J.However,TDS is to be deducted when amount of payment in a year exceeds Rs.30,000/- at the rate of 10%.

Who is required to deduct TDS u/s 194J?

As per this section, any person (but not an individual or HUF) who pays to a resident fees for professional or technical services, will be required to deduct tax at source u/s 194J.

However, individual or HUF will be required to deduct TDS if they are liable to audit u/s 44AB (a) and (b).

Person here means :

• Central or State Government
• Local Authority
• Corporation
• Company
• Cooperative Society
• Trust
• University
• Registered Society
• Firm
• Individual/HUF/AOP/BOI required to get accounts audited u/s 44AB (a) and (b)

Which services are covered under section 194J?

Following type of services are covered under section 194J:

1. Fees for professional service
2. Fees for technical service
3. Remuneration or fee or commission to a director of a company (which is not liable to TDS u/s 192).
4. Royalty
5. Payment received (in cash or kind) under an agreement for:

• Not carrying out any activity in relation to any business, or
• Not sharing any know-how, patent, copyright, trademark, license, franchise or any other business/ commercial right of similar nature/ information/ technique.

What is the limit to deduct TDS u/s 194J?

TDS is required to be deducted if the amount of payment in a year exceeds Rs. 30,000/-.

Now a question may arise in your mind whether this threshold limit is the overall limit for all services covered u/s 194J or it shall be calculated individually for payment of professional fees or technical fees etc.

This limit of Rs. 30,000/- is not a total limit for all services.It shall be calculated individually for payment as professional fees or technical fees or royalty or non-competence fees.

What is the rate & time of tax deduction u/s 194J?

The rate of tax deduction u/s 194J is 10%.

And the time of deduction is earlier of,

- The credit of income to the account of the payee (receiver) or

- Actual payment (in cash, cheque, draft or other modes).

When is Section 194J not applicable?

These are the exception to section 194J applicability:

Where the payment made by an individual or HUF is for personal purposes only.

If payment is made to a non-resident contractor or sub-contractor.

Where the amount of payment (at one time or in total during the whole financial year) does not exceed Rs. 30000

What is the time limit to deposit TDS u/s 194J ?

Given below are time limit to deposit the TDS with government :

What is the time limit to file TDS return u/s 194J ?

After depositing TDS to the government, quarterly TDS return in form 26Q is also required to be filed. Given below are the due dates:

Particulars   Due Date

April - June   31st July

July - September  31st October

October-December  31st January

January - March   31st May

6.2 Advance Tax

Sec 207- Income Liable to Advance Tax

(1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income".

(2) 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 previous year.

Sec 208- Liability of Advance Tax

Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is ten thousand rupees or more.

Sec 209- Computation of advance Tax

(1) The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of sub-sections (2) and (3), be computed as follows, namely :-

(a) where the calculation is made by the assessee for the purposes of payment of advance tax under sub-section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, he shall first estimate his current income and income-tax thereon shall be calculated at the rates in force in the financial year;

(b) where the calculation is made by the Assessing Officer for the purpose of making an order under sub-section (3) of section 210, the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment or the total income returned by the assessee in any return of income furnished by him for any subsequent previous year, whichever is higher, shall be taken and income-tax thereon shall be calculated at the rates in force in the financial year;

(c) where the calculation is made by the Assessing Officer for the purpose of making an amended order under sub-section (4) of section 210, the total income declared in the return furnished by the assessee for the later previous year, or, as the case may be, the total income in respect of which the regular assessment, referred to in that sub-section has been made, shall be taken and income-tax thereon shall be calculated at the rates in force in the financial year;

(d) the income-tax calculated under clause (a) or clause (b) or clause (c) shall, in each case, be reduced by the amount of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so reduced shall be the advance tax payable:

Provided that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not, in each case, be reduced by the aforesaid amount of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax.

(2) Where the Finance Act of the relevant year provides that, in the case of any class of assessees, net agricultural income (as defined in that Act) shall be taken into account for the purposes of computing advance tax, then, the net agricultural income to be taken into account in the case of any assessee falling in that class, shall be-

(a) in cases where the Assessing Officer makes an order under sub-section (3) or sub-section (4) of section 210,-

(i) if the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment forms the basis of computation of advance tax payable by him, the net agricultural income which has been taken into account for the purposes of charging income-tax for the assessment year relevant to that previous year; or

(ii) if the total income declared by the assessee for the later previous year referred to in sub-section (4) of section 210 forms the basis of computation of advance tax, the net agricultural income as returned by the assessee in the return of income for the assessment year relevant to such later previous year;

(b) in cases where the advance tax is paid by the assessee on the basis of his estimate of his current income under sub-section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, the net agricultural income, as estimated by him, of the period which would be the previous year for the immediately following assessment year.

(3) Where the Finance Act of the relevant year specifies any separate rate or rates for the purposes of computing advance tax in the case of every Hindu undivided family which has at least one member whose total income of the previous year exceeds the maximum amount not chargeable to income-tax in his case, then, the Assessing Officer shall, for making an order under sub-section (3) or sub-section (4) of section 210 in the case of any such Hindu undivided family, compute (subject to the provisions of section 164) the advance tax at such rate or rates-

(a) in a case where the total income of the latest previous year in respect of which the Hindu undivided family has been assessed by way of regular assessment forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such latest previous year exceeds the maximum amount not chargeable to income-tax in his case;

(b) in a case where the total income of the previous year in respect of which a return of income is furnished by the Hindu undivided family under section 139 or in response to a notice under sub-section (1) of section 142 forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such previous year exceeds the maximum amount not chargeable to income-tax in his case.

Sec 210- Payment of Advance Tax by Assessee on His on Account

(1) Every person who is liable to pay advance tax under section 208 (whether or not he has been previously assessed by way of regular assessment) shall, of his own accord, pay, on or before each of the due dates specified in section 211, the appropriate percentage, specified in that section, of the advance tax on his current income, calculated in the manner laid down in section 209.

(2) A person who pays any instalment or instalments of advance tax under sub-section (1), may increase or reduce the amount of advance tax payable in the remaining instalment or instalments to accord with his estimate of his current income and the advance tax payable thereon, and make payment of the said amount in the remaining instalment or instalments accordingly.

(3) In the case of a person who has been already assessed by way of regular assessment in respect of the total income of any previous year, the Assessing Officer, if he is of opinion that such person is liable to pay advance tax, may, at any time during the financial year but not later than the last day of February, by order in writing, require such person to pay advance tax calculated in the manner laid down in section 209, and issue to such person a notice of demand under section 156 specifying the instalment or instalments in which such tax is to be paid.

(4) If, after the making of an order by the Assessing Officer under sub-section (3) and at any time before the 1st day of March, a return of income is furnished by the assessee under section 139 or in response to a notice under sub-section (1) of section 142, or a regular assessment of the assessee is made in respect of a previous year later than that referred to in sub-section (3), the Assessing Officer may make an amended order and issue to such assessee a notice of demand under section 156 requiring the assessee to pay, on or before the due date or each of the due dates specified in section 211 falling after the date of the amended order, the appropriate percentage, specified in section 211, of the advance tax computed on the basis of the total income declared in such return or in respect of which the regular assessment aforesaid has been made.

(5) A person who is served with an order of the Assessing Officer under sub-section (3) or an amended order under sub-section (4) may, if in his estimation the advance tax payable on his current income would be less than the amount of the advance tax specified in such order or amended order, send an intimation in the prescribed form51 to the Assessing Officer to that effect and pay such advance tax as accords with his estimate, calculated in the manner laid down in section 209, at the appropriate percentage thereof specified in section 211, on or before the due date or each of the due dates specified in section 211 falling after the date of such intimation.

(6) A person who is served with an order of the Assessing Officer under sub-section (3) or amended order under sub-section (4) shall, if in his estimation the advance tax payable on his current income would exceed the amount of advance tax specified in such order or amended order or intimated by him under sub-section (5), pay on or before the due date of the last instalment specified in section 211, the appropriate part or, as the case may be, the whole of such higher amount of advance tax as accords with his estimate, calculated in the manner laid down in section 209.

Sec 211- Due dates of Payment of Advance Tax

Section 211 of Income Tax Act "Installments of advance tax and due dates"

Advance tax liability of all assesses as per the amended provision of Section 211 of Income Tax Act, 1961 is as under:

6.3 Interest Payable

Sec 234A- Interest for default in furnishing return of income

Interest under section 234A is imposed when there’s a delay in filing income tax returns. The due date for filing the returns is usually before July 31 of every following assessment year. Under this Section, interest is charged at 1 % on the outstanding tax amount and must be paid from the first day after the due date of filing the return until the date of the actual filing of the return.

Calculating interest penalty under 234A:

For instance, Geeta has a total tax outstanding of Rs. 3,00,000 (Including net advance tax and TDS) Instead of filing her returns on July 31, she files it on January 15. She is now late by 6 months on the tax payment. Here’s how much she’s liable to pay:

Interest = 3,00,000 X 1% X 6 = 18000

Geeta will now have to pay Rs. 18,000 after the tax amount. The interest will continue until March 31st that is the end of the assessment year.

Sec 234B- Interest for default in payment of Advance Tax

Interest under section 234B is imposed if you make incomplete tax payments. It is also levied in case of a delay in the payment of advance tax. You must pay interest under Section 234B if you are liable to pay advance tax but have failed to do so. However, it is also imposed if you have paid advance tax but the amount is less than 90% of the assessed tax.

Calculating interest penalty under 234B of the Income Tax Act:

Let’s say Priya must pay a total tax of Rs. 2,00,000 for the current fiscal year. The TDS deduction amounted to Rs. 1,82,650. On March 25, Priya paid Rs. 7,000 while the balance amount of Rs. 10,350 was paid on July 20. Let’s calculate the penalty now:

Assessed tax = Total Tax – TDS

= Rs. 2,00,000 – Rs. 1,82,650

= Rs. 17,350

Priya should have paid at least 90% of Rs. 17,350 which amounts to Rs. 15,615, on March 31. However, Priya only made a payment of Rs. 7,000. Hence Priya will have to pay an interest penalty on the assessed tax.

So Priya has to pay:

Rs. 15,600 (rounded figure) x 1% x 4 months (calculated till July) = Rs. 624.

Hence Priya is liable to pay Rs. 624, as a penalty on the interest of the assessed tax, under Section 234B.

Sec 234C- Interest for deferment of Advance Tax

Interest under section 234C is imposed when there is a delay in payment of an instalment of advance tax.

You pay interest under Section 234C if,

• Advance Tax is paid on or before 15th June is less than 12% of Assessed Tax
• Advance Tax is paid on or before 15th September is less than 36% of Assessed Tax
• Advance Tax is paid on or before 15th December is less than 75% of Assessed Tax
• Advance Tax is paid on or before 15th March is less than 100% of Assessed Tax

Here’s how you calculate the interest for late payment of advance tax:

The interest on late payment is calculated at 1% simple interest on the tax amount due, calculated from individual cut off dates shown above, until the date of actual payment of outstanding taxes.

Calculation of Interest under section 234C: (in case of a tax payer other than opting for presumptive income u/s 44AD).

Here’s how you calculate the interest:

*Amount = Tax on total income less TDS less relief u/s 90 or 91 less tax credit u/s 115JD

Let’s say your total tax liability for this financial year is Rs. 100,000 it needs to be paid in installments.

Here’s how:

So the total interest that you need to pay is Rs. 2600.

References:

1. Www.taxguru.com
2. Income Tax Act with Gist of Supreme Court Rulings Book (Bharat Law House.)
3. Income Tax Law & Accounts For B.Com Vth Semester of Calicut University  (English, Paperback, Dr. H.C. Mehrotra, Dr. S.P. Goyal)