Has your company paid its Advance tax?


Are you director of a company? Please make sure that your company has paid the last installment of advance tax by 15 March 2015 i.e 100% of tax liability payable for the financial year.

Unaware of what is Advance tax? Please read this post further:

You must be aware that every Indian company is required to pay tax on profits made by it during the year. Now you would think that the due date for payment of income tax for companies is 30 September next year. Therefore, tax should be paid by then. So what is this advance tax that needs to be paid now?

Actually, tax collected is a major source of revenue for Government. If all the tax would be collected at the end i.e 30 September of the next year, then the government would not have much funds to spend during the year. Therefore, the provision for advance tax was introduced to maintain a regular flow of receipts for the Government during the whole year. So, the tax which would be payable for a year, is broken up and has to be paid in 4 installments during that year i.e Pay as you Earn. This is payable by all the assessees (including companies) whose tax liability would be more than INR 10,000 in a year.

But how would I compute profits before the closure of the books of accounts? How do I know, how much I will make this year?
Well! You need to anticipate it. Guess it. You have to pay tax on those anticipated profits. As you get closer to year end, you would have a fair idea of your company’s performance in the year. Pay your advance tax in March considering those profits.

What about the TDS that has already been deducted from my income?
Reduce the TDS from the income tax liability and balance tax has to be payable as per advance tax installments prescribed.

What are the dates when Advance tax is due during the year?
Companies are required to pay advance tax 4 times a year. For each date, the percentage of tax that needs to be paid is prescribed. They are as follows:
15 June – Not less than 15% of tax liability
15 September – Not less than 45% of tax liability. This is after considering the earlier advance tax installments paid, if any.
15 December – Not less than 75% of tax liability. This is after considering the earlier advance tax installments paid, if any.
15 March – 100% of tax liability. This is after considering the earlier advance tax installments paid, if any.

What if I don’t pay it?
Well…you won’t be imprisoned. Just penalty in form of interest on the amount of advance tax not paid. Interest @ 1% per month is payable on the amount not paid on time and deferred. In case atleast 90% of the assessed tax liability is not paid till the end of the year, then also interest is to be paid @ 1% per month on the unpaid amount.

Please tell me the exact sections of the Income tax Act, 1961.
You can refer sections 207 to 211 for levy of Advance tax and Section 234B and 234C for the penalties applicable.

If you have any other question, you can contact us at tofler@tofler.in or post it as comment to this post.