Advance tax refers to ‘Tax payable in advance during the financial year in respect of an assessee’s current income.
Advance Tax provisions are not applicable in the following cases:
- Tax Payable is less than Rs.10,000.
- Resident Senior citizen without business income.
- Business Income u/s 44AD (Presumptive Basis).
Procedure for computing Advance Tax:
- An Assessee has to first estimate his current income(under five heads of income after applying the provisions).
- The Assessee shall then compute the income tax payable on his current income at the rates in force in the financial year.
- The tax so calculated shall be reduced by the amount of tax which has been actually deducted at source.
Consequences when advance tax is not paid:
- Interest u/s 234B for default in payment of advance tax i.e.,1% per month or part of month.
- Interest u/s 234C for deferment of advance tax i.e.,1% per month for a period of 3 months.