Page 280 - DCOM508_CORPORATE_TAX_PLANNING

Unit 12: Advance Tax Planning and Tax Relief

12.1.2 Computation and Payment of Advance Tax where the Calculation is Notes
made by the Assessee Himself [Section 209]

As per the various provisions [Section 208 to 219] relating to Advance tax, tax shall be payable
in advance during the financial year in respect of the total income of the assessee which would

be chargeable to tax during the assessment year immediately following the financial year. Such

income shall be referred to as ‘Current income’. We know that income earned during the fi nancial
year 2010-11 shall be charged to tax in the assessment year 2011-12. but the assessee in required
to pay tax, in advance, on the taxable income of financial year 2010-11 during the fi nancial year

2010-11 itself, if certain conditions are fulfilled. Thus, Advance tax payable by an assessee in the

financial year on his own accord shall be computed as follows:
Step 1 – Estimation of Income: Current income of the financial year for which the advance tax is

payable should be estimated.
Step 2 – Computation of tax: The tax payable on estimated income at the rates applicable for the
financial year should be computed.

Step 3 – Adjustment of Rebate: From the tax computed in Step 2, rebate if any likely to be allowed
under Section 88E should be reduced.

Step 4 – Surcharge on tax: On the net tax computed in step 3, Surcharge as applicable should be
added and relief, if any, under section 89 should be allowed.

Step 5 – Education cess @ 2% of tax and Surcharge is to be added.
Step 6 – Deduction of tax at source: Tax deductible at source as per relevant provisions should be
deducted from the tax payable before payment of net amount of tax.
Step 7 – Advance tax payable: The balance amount is the advance tax payable and if it happens to
be more than ` 5,000, it will be payable in certain instalments as provided in Section 211.

12.1.3 How to Deposit Advance Tax?

Advance Tax can be deposited through Challan No. 280 in the Government Treasury (RBI) or
any of the authorised branches of nationalised banks. Printed challan forms are available with the

Income Tax Office free of cost. While filing challan the following fields are required to be fi led.

1. Assessee’s Name
2. Complete Address of Assessee.
3. Permanent Account Number

4. Assessment Year
5. Assessing Officer’s Ward or Circle

6. Amount of Advance Tax, Surcharge and Cess (if any).
Online deposit of Advance Tax is best payment method. When we deposit or pay online Advance
Tax, there is no need to collect Physical Challan No. 280 or no need to stand in big rows to deposit
advance tax in banks or treasury etc. Thus, the payment of Advance Income Tax is to be made

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