Welcome to Indian Market Access
Advance Tax Provisions
Advance Tax Provisions
Advance tax on the current income is calculated in the manner laid down in section 209 of the Act and is payable by all the taxpayers, who are liable to pay the same. It is payable in four instalments during each financial year as per the table below:
| Instalment | Due date of instalment | Amount payable |
|---|---|---|
| 1 | On or before the 15th June | Not less than 15% of such advance tax. |
| 2 | On or before the 15th September | Not less than 45% of such advance tax, as reduced by the amount, if any, paid in the earlier instalment. |
| 3 | On or before the 15th December | Not less than 75% of such advance tax, as reduced by the amount, if any, paid in the earlier instalment. |
| 4 | On or before the 15th March | The whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments; |
| 5 | On or before the 31st March | Any amount paid on or before 31st March shall also be treated as advance tax paid during the financial year for all purposes under the Act. |
Notes:
- Provided that if the tax paid by 15 June is not less than 12% of the advance tax due on returned income for the year, this interest would not be applicable.
- Provided that if the tax paid by 15 September is not less than 36% of the advance tax due on returned income for the year, this interest would not be applicable.
Payment of advance tax
In cases where tax is not withheld at source, the FPI is required to discharge the tax liability on a self-assessment basis as ‘advance tax’, either:
- Prior to remittance of funds outside India, or
- By the relevant advance tax due dates, Whichever is earlier.
FPIs’ are mandatorily required to appoint tax consultant in India to assist the FPI to undertake this determination of advance tax payable on each transaction.
Where the payment of tax is undertaken post the end of the financial year and prior to the filing of return of income, the same would be considered as ‘self-assessment tax’ and not advance tax.
Interest for Non-Compliance
Failure to comply with advance tax provisions attracts interest under the following sections:
- Section 234B – Interest for default in payment of advance tax
- Computed when advance tax paid is less than 90% of the assessed tax.
- Interest at 1% per month is levied from 1st April of the assessment year till the date of actual payment of tax.
- Section 234C – Interest for deferment in the payment of advance tax
- Levied if the amount paid by each due date is less than the required percentage (12%, 36%, 75%, 100%) of total tax liability.
- Interest at 1% per month for up to 3 months, depending on the shortfall.
Note: In case of capital gains, interest under section 234C of the Act is not applicable on the shortfall in advance tax instalments provided such shortfall is on account of under-estimate or failure to estimate the amount of capital gains and the whole of tax payable on such capital gains is paid by the advance tax payment deadline immediately due after the date when such capital gains arise.