• Notification Date: 12-03-2022
  • Notification No: N/A

Implications of Advance Tax Defaulting

An individual who is subjected to taxable tax under the Income-tax Act, 1961, is liable to pay Income tax as per their income scale within a financial year. The income tax imposed on a taxpayer is calculated according to the provisions of the Income Tax Act, 1961. The Income-tax is to be paid directly to the Central Government. The tax is paid in different modes, such as tax deducted at source (TDS), tax collected at source (TCS), advance tax, and self-assessment tax.

For the salaried employees, the tax is withheld by the employee that is deducted from the salary. This tax is then remitted to the government. Banks and financial sectors withhold the tax on the interest payments on the fixed deposits. For other sources of income where there is no TDS available or if the deducted tax does not cover up the total liability, in that case, the tax liability is discharged by the advance tax.

In case, an individual fails to pay the advance tax within the definite time or misses to pay any of the installments, then the first three quarters of the due amount will be charged with an additional 3 per cent for every quarter.  The final quarter will be charged with 1 per cent of interest. In case, the advance tax paid by a taxpayer is 90 per cent of the total tax amount, then the individual will be charged with an additional 1 per cent of interest every month on the shortfall of the advance tax payment.

In case, an individual has no income from any profession or business, then there is no advance tax applicable on that person. If the income of an individual arises from capital gains and dividend income, then the income tax is not properly evaluated on the income. If the income is earned after the due date of installment, then the tax calculated on such income is based on the remaining installments of advance tax.

15 March, 2022 is the deadline for paying the final installment of the advance tax for the financial year 2021-22. The taxpayers are recommended to evaluate their advance tax liability as soon as possible to avoid any further interest implications on the pending installments.