Thursday, August 13, 2015

Assessee obligation under Income Tax Act

Assessee Obligation – An overview
  • Assessee obligation under income–tax Act: 
  1. Estimate the current income and pay “advance tax” if income exceeds ‘basic exemption limit’ 
  2. Trace the account of “tax deducted and collected at source” before discharging tax liability. 
  3. File return of income within due date, as specified under section 139(1) 
  4. Before filing pay entire tax due and attach proof of deposit with return of income (ROI). 
  5. The income mentioned in the ROI by assessee is called “taxable income or returned income”. 
  • Return of income is to be filed by assessee under any of the sections namely section 139(1), 139(3), 139(4), 139(5), 142(1), 148 and section 153A. 
  • Section 2(7): Assessee means a person by whom any tax or any other sum payable under this Act and includes (i) every person in respect of whom any proceeding under this Act has been taken place;  (ii) every person who is deemed to be an assessee under any provision of this Act; (iii) every person who is assessee is in default under this Act. 
Section 207 to 219: Advance tax – Synopsis 
  • Since not all types of payment are not covered in the tax deducted at source, the concept of advance tax is introduced to ensure payment of taxes on the basis of “Pay as you earn” 
  • Sec. 208: Payment of advance tax arises where the total tax payable is INR.10,000 p.a. or more. 
  • Interest u/s 234B and 234C is not liable where tax is less than `10,000 p.a. 
  • Exception for advance tax compliance: Section 140A (Payment at the time of filing return is sufficient compliance) 

  1. The person, who opted presumptive taxation u/s 44AD even tax payable exceeds INR. 10,000 p.a. 
  2. A resident individual who does not have any business/profession income and of age 60 years or more. 

  • Sec. 210: If assessment has already been made on an assessee for any previous year (and) the assessing officer is of the opinion that such person is liable to pay advance tax, then he may at any time during the FY but not later than February by order in writing require to pay advance tax. 
  1. No appeal is possible against an order passed u/s. 210 
  2. Non-compliance of order results in assessee is in default u/s. 220 
  3. Sec. 210 order is permitted only for completed assessments
  • An assessee has to estimate his current income and pay advance tax thereon. 
  • Sec.209: Only TDS/TCS actually deducted or collected shall be reduced while computing advance tax liability. 
  • If last date of payment is a public holiday; next immediately following working day is the due date. Interest u/s 234B and 234C is not liable to pay. 
  • Where the assessee does not pay any installment by the due date, he shall be deemed to be an assessee is in-default in respect of such installment. 
  • Section 234A and section 234B interest were computed on the “assessed income”, where as section 234C interest is computed on “returned income” 
Statement of due date of Advance Tax


Note: no interest would be levied if 1st and 2nd installments are paid up to 12% and 36% as against 15% and 45% of tax in case of corporate assessees.

Section 234B: Interest on non-payment of advance tax
  • If assessee has not paid advance tax (or) payment of advance tax is less than 90% of assessed tax. 
  • Assessed tax refers tax on total income u/s 143(1) as reduced by (i) tax deducted at source; (ii) relief u/s 90 or 90A; (iii) any deduction of tax u/s 91; (iv) any MAT/AMT credit {(w.e.f. 01.04.2012)} 
  • Sec. 234B (1): 1% per month or part of month on the amount of tax short paid (less than 90%), starting from 1st April following the end of the financial year till the date of payment or assessment. 
  • Sec. 234B (3): 1% per month or part of month from next day of regular assessment to date of payment, where notice is issued u/s 147 or u/s 153A. 
  • Interest = {(shortfall x 1% pm x period of default)} 
Section 234C: Interest on deferment of advance tax
  • Advance tax installments are not properly paid (or) if payment is deferred over other installments. 
  • In case of corporate assessee, no interest would be levied if 1st and 2nd installments are paid up to 12% and 36% as against 15% and 45% of tax due on the returned income. (80% of returned income) 
  • Interest = {(shortfall x 1% pm x period of default)} 
  • Tax credit relating to tax liability u/s 115JC has to be reduced for computing tax due on the returned income. 

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