02-05-2013, 12:50 PM
PROCEDURE OF ADVANCE PAYMENT OF TAX (PPT)
PROCEDURE OF ADVANCE.pptx (Size: 268.85 KB / Downloads: 36)
INTRODUCTION
Although the income of previous year of the assessee is taxable in the immediately following assessment year, the assessee has to pay advance tax during the Financial Year proceeding the assessment year on the basis of his own computation of income. At present all items of income including capital gains, winnings from lotteries, etc. are liable for payment of advance tax. Section 208 now makes it obligatory to pay advance tax in every case where the advance tax payable is Rs. 5,000 or more. Assessee is required to pay advance tax on their income which they expect to earn during current Financial Year. Thus, for Financial Year 2008-09 (relevant to assessment year 2009-10) advance tax is payable in installments during the Financial Year 2008-09, itself. The advance tax so paid is adjusted against the total tax assessed for the assessment year 2009-10.
Advance Payment Of Tax
Advance Payment of tax is another method of collection of tax by the Central Government in the Form of ‘Prepaid Taxes’. Such advance tax is in addition to deduction of tax at source or collection of tax at source. Scheme of advance payment of tax is also known as ‘pay as you earn’ scheme i.e., the assessee is required to pay tax during the course of earning of income in the previous year itself, though such income in chargeable to tax during the assessment year. Advance tax is payable on current income in installments during the previous year.
Liability for payment of Advance tax [Section 207]
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 financial year 2005-06 shall be charged to tax in the assessment year 2006-07. but the assessee in required to pay tax, in advance, on the taxable income of financial year 2005-06 during the financial year 2005-06 itself, if certain conditions are fulfilled.
Advance Tax Payable
Tax on current income at the rate in force during the financial year will be calculated by the Assessing Officer. From such tax calculated, the amount of income-tax which would be deductible or collectible at source during the said financial year shall be reduced and the amount of income-tax as so reduced shall be the advance tax payable.
COMPUTATION OF ADVANCE TAX
Step I –Estimate the current income of the financial year for which the advance tax is payable.
Step II- Compute tax on such estimated current income at the rate(s) of tax given under Part III of the First Schedule of the relevant Finance Act.
Step III- From tax so computed, deduct the rebate, if any , likely to be allowed u/s 88E.