Missed paying Advance Income Tax before 31 March 2020 because of Lockdown? Know Implications

Missed paying Advance Income Tax before 31 March 2020 because of Lockdown? Know Implications

The Novel Coronavirus across the world has stopped almost all business by the end of March month. The due date to pay last installment of advance tax for FY2019-20 was 15 March 2020. However Tax paid on or before 31 March 2020 is also considered as Advance Tax

Section 211 of the Income Tax Act, 1961 provides the amount of installments of advance tax and due dates, as stated below. All Taxpayers who are liable to pay the same (Tax liability more than Rs 10,000) during the year), in four installments during each financial year and the due date of each installment

Due date of installment Amount payable
On or before the 15th June Not less than fifteen per cent of such advance tax
On or before the 15th September Not less than forty-five per cent of such advance tax, as reduced by amount, if any paid in the earlier instalment
On or before the 15th December Not less than seventy-five per cent of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments.
On or before the 15th March The whole amount of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments

In case Taxpayers who declares profits and gains in accordance with the provisions of sub-section (1) of section Special provision for computing profits and gains of business on presumptive basis 44AD or sub-section (1) of section 44ADA, as the case may be, to the extent of the whole amount of such advance tax during each financial year on or before the 15th March. Provided that any amount paid by way of advance tax on or before the 31st day of March shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of this Act’’

Does Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 provides any relaxation?

Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 Says

“Where any due date has been specified in, or prescribed or notified under, the specified Act for payment of any amount towards tax or levy, by whatever name called, which falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020 or such other date after the 29th day of June, 2020 as the Central Government may, by notification, specify in this behalf, and such amount has not been paid within such date, but has been paid on or before the 30th day of June, 2020, or such other date after the 30th day of June, 2020 as the Central Government may, by notification, specify in this behalf, then, notwithstanding anything contained in the specified Act,

a) the rate of interest payable, if any, in respect of such amount for the period of delay shall not exceed three-fourth per cent. for every month or part thereof.

b) no penalty shall be levied, and no prosecution shall be sanctioned in respect of such amount for the period of delay.’’

The due date of last instalment of Advance Tax for the Financial Year 2019-20 or AY 2020-2021 was 15 March 2020. The payment of tax on or before 31 March 2020 is also treated as advance tax though there is no relaxation of interest u/s 234C and any tax deposited after 31 March 2020 shall be treated as self-assessment tax.

No Relaxation provided and have to pay Interest

There is no relaxation for late deposit of advance tax provided in such case under The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020.

Under Section 234B, interest is levied for default in the payment of advance tax. This interest is levied in two cases;

  • When the taxpayer has failed to pay advance tax though he is liable to pay advance tax; or
  • Where the advance tax paid by the taxpayer is less than 90% of the assessed tax (the meaning of assessed tax is discussed later)

Under section 234B, interest for default in the payment of advance tax is levied at 1% per month or part of a month. In other words, the taxpayer is liable to pay simple interest at 1% per month for default in the payment of advance tax. if have either not paid any tax for an assessment year, or paid less than 90% of the advance tax due, then you’ll have to pay 1% simple interest on the tax dues.

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