Page 396 - DCOM301_INCOME_TAX_LAWS_I

Unit 14: Advance Tax Planning and Tax Relief

Notes

Notes Payment of Advance Tax in Case of Capital Gains/Casual Income [Proviso to
Section 234C]
(1) Advance tax is payable by an assessee on his/its total income, which includes capital
gains and casual income like income from lotteries, crossword puzzles etc.

(2) Since it is not possible for the assessee to estimate his capital gains, income from
lotteries, etc., it has been provided that if any such income arises after the due date
for any instalment, then, the entire amount of tax payable (after considering tax
deducted at source) on such capital gains or casual income should be paid in the
remaining instalments of advance tax which are due.
(3) Where no such instalment is due, the entire tax should be paid by 31st March of the
relevant financial year.

(4) No interest liability under section 234C would arise if the entire tax liability is so
paid.

14.1.1 Who is Liable to Pay Advance Tax?

If the Income Tax Liability of any assessee is more than ` 10,000 in a financial year, then he is
liable to pay such tax in instalments during the year itself rather than paying this tax at the end
of the year. This tax which is payable during the year is called “Advance Tax” or “pay as you earn
tax” as tax is liable to be paid at the time the income is earned i.e. during the year rather than
paying this tax at the end of the year.
(1) Advance Tax is required to pay under section 208 of Income Tax Act 1961 for all those
assesses including Salaried and Pensioners whose advance tax on estimated income comes
(after deducted TDS/TCS if any) to ` 10,000/- or more in a Financial Year F.Y. 2010–11.
Thus, if Income Tax payable (after deducting all deductions, rebates and TDS) is less than
10000 in a financial year 2010–11, there is no need to deposit any Advance Tax and the same
tax will be deposited at the time of self assessment before filing of income tax return.

(2) In case an order u/s 210(3) is received by the person to pay an amount by way of Advance
Tax in Form No. 28, should deposit such amount in the instalments as specified in the
order. This type of orders can be issued upto the last day of February of the financial year.
If that person estimates his income at a higher amount than that specified in the orders u/s
210(3), then he should pay advance tax in accordance with such higher estimate.

However under sections 210(4) & (5) of Income Tax Act 1961, if he estimates him income at a
lower amount, then he should send an estimate of such lower income in Form28-A, before the
next instalment falls due and deposit the remaining instalments of advance tax accordingly.

Notes Important Note for Salaried Tax-Payers
Advance Tax is different from Tax Deducted at Source (TDS). In case of salaried people,
normally tax is deducted at source from their salaries, by the employer. Their income for
the year is estimated, tax calculated thereon and 1/12th of such estimated tax is deducted
from their monthly salary bill.
Contd...

LOVELY PROFESSIONAL UNIVERSITY 391