Advance Tax – CMA Inter Direct Tax Study Material is designed strictly as per the latest syllabus and exam pattern.
Advance Tax – CMA Inter Direct Tax Study Material
Short Notes
Question 1.
Write short note on the following:
Advance tax for senior citizens being resident/non-resident. (Dec 2017, 5 marks)
Answer:
Advance Tax ¡s not payable by:
An individual, Resident India, who does not have any Income chargeable under the head “Profits and Gains of Business or profession” and is of the age of 60 years or more at any time during the previous year. Advance tax is payable by senior citizen being non-resident.
Descriptive Question
Question 2.
Enumerate the conditions for exemptions of senior citizens from payment of advance tax u/s 207. (June 2013, 4 marks)
Answer:
Every assessee is required to pay Advance Tax if the tax liability for the previous year is ₹ 10,000/- or more. From the financial year 2017-18. Section 207 has been amended to provide that Advance Tax need not be payable in the case of senior citizens if the following conditions are satisfied.
Question 3.
Answer the following question with brief reason/working:
Is a company liable to pay advance tax when it is required to pay tax on “book profit” under section 115JB? (Dec 2015, 2 marks)
Answer:
There is specific provision in Section 115JB(5) providing that all other provisions of the Income-tax Act shall apply to every assessee, being a company mentioned in that section. Section 115JB is a self-contained code pertaining to MAT and by virtue of sub-section (5) thereof, the liability for payment of advance tax would be attracted.
Question 4.
Answer the following questions in the context of the provisions relating to advance tax:
(i) Who is not liable to pay advance tax, in case of individual assesses?
(ii) State the due dates of instalment for payment of advance tax and the amount of instalment for such assessees who are not covered under the provisions of Section 44AD. (June 2017, 6 marks)
Answer:
(i) Advance Tax Is not payable by:
- An Individual
- Resident in India
- Who does not have any income chargeable under the head “Profits and Gains of Business or Profession” And is of the age of 60 years or more-at any time during the previous year.
(ii) Advance Tax is payable in the following Installments:
In case of all Assessees except those who are covered under section 44AD
| Due date of Instalment | Amount Payable (₹) |
| On or before 15th June | Not less than 15% of the advance tax liability. |
| On or before 15th September | Not less than 45% of the advance tax liability as reduced by the amount, if any, paid in earlier instalment. |
| On or before 15th December | Not less than 75% of the advance tax liability as reduced by the amount, if any, paid in earlier instalment. |
| On or before 15th March | The whole of the advance tax liability as reduced by the amount, if any, paid in the earlier instalments. |
Question 5.
State the due dates for payments of advance tax, along with the quantum of amount payable in each instalment. Present your answer in the fomi of a table. (Dec 2018, 7 marks)
Answer:
Advance tax is payable in the following installment:
In case of all assessee except those who are covered under Section 44 AD or 44 DA
| Due date of Installment | Amount Payable |
| On or before 15th June | Not less than 15% of the advance tax liability |
| On or before 15th September | Not less than 45% of the advance tax liabilities as reduced by the amount it any paid in earlier installment |
| On or before 15th December | Not less than 75% of the advance tax liability as reduced by the amount, if any paid in earlier installment |
| On or before 15th March | The whole amount of the advance tax liability as reduced by the amount, it any paid in earlier installment |
In case of Eligible Assessee in respect of an eligible business referred to in Section 44AD or eligible profession referred to ¡n Section 44ADA. On or before 15th March – The whole amount of the advance tax liability.
Question 6.
What are the conditions to be satisfied for issuing notice of demand u/s 156 requiring the assessee to pay advance tax and when can it be passed by the Assessing Officer? (Dec 2021, 4 marks)
Answer:
Conditions for seeking advance tax from tax payer by the AO
The. A.O. may pass an order and issue a notice of demand u/s 156 requiring the assessee to pay advance tax.
Conditions to be satisfied for issuing such order
- The assessee has already been assessed by way of a regular assessment in any previous year.
- The Assessing Officer is of opinion that such person ¡s liable to pay advance tax.
- Such order can be passed at any time during the financial year but not after last day of February.
- Such order must be made in writing.
- Such order also specifies the amount of advance tax and the installments thereof to be paid by the assessee.
Note: Such order can be issued even if assessee has paid any installment of advance tax during the year, which is, in the opinion of the Assessing Officer, not as per the provision of sec. 211.
Practical Questions
Question 7.
Vijay, a resident individual aged 59, is running a wholesale business in fertilisers, whose turnover for the year ended 31.03:2023 is ₹ 70 lacs. Is he liable to pay advance tax, if he maintains books of accounts and gets his accounts audited under section 44AB of the Income-tax Act, 1961 (business income is ₹ 5.2 lacs)? Will your answer be different if he opts for presumptive taxation? He has no other income. (June 2015, 3 marks)
Answer:
Liability to pay advance tax:
Where the assessed tax payable by an individual who is not a senior citizen, exceeds ₹ 10,000, he is liable to pay advance tax.
In the first situation, since the tax payable on total income exceeds ₹ 10,000 he is liable to pay advance tax. Where he opts for presumptive tax, the obligation to pay advance tax will not arise at all.
Question 8.
Compute the amounts of. advance tax installments, payable in the financial year 2022-23 in respect of the following cases:
(i) A domestic company with tax liability of ₹ 3,90,000.
(ii) A super senior citizen (age above 80) having pension income of ₹ 3 lakhs and property income (computed) ₹ 5 lakhs. (Dec 2016, 4 marks)
Answer:
(i) Calculation of Installment of Advance Tax for a domestic company with Tax Liability of ₹ 3,90,000
15% of Tax Liability upto 15th June ₹ 58,500
45% of Tax liability upto 15th September ₹ 1,17,000(1,75,500 – 58,500)
75% of Tax Liability upto 15th December ₹ 1,17,000(29,25,00 – 1,75,500)
100% of Tax Liability upto 15th March ₹ 97,500. (3,90,000 — 2,92,500)
(ii) A super senior citizen (age above 80) having pension income of ₹ 3 lakhs and property income (computed) ₹ 5 lakhs. In the case of senior citizens and super senior citizens as per section 207(2) no advance tax is payable where they do not have income chargeable under the head ‘profits and gains of business or profession’.
Thus advance tax liability = ‘NIL’.
Question 9.
Mr. Madavan (aged 35 years), a resident individual, is a dealer of garments. During the previous year 2022-23, total turnover of his business was ₹ 135 lakhs (out of which ₹ 22.5 lakhs were received by way of account payee cheques and balance in cash). Mr. Madavan does not opt to pay tax as per the provisions-of section 115BAC. What would be your advice to Mr. Madavan relating to the provisions of advance tax with its due date, along with the amount payable, assuming that he wishes to make maximum tax savings without getting his books of account audited. (Dec 2021, 5 marks)
Answer:
Computation of advance tax of Mr.Madavan under Presumptive Income scheme as per section 44AD. The total turnover of Mr. Madavan, a dealer of garments, is ₹ 135 lakhs. Since his total turnover from such business is less than ₹ 200 lakhs and he does not wish to get his books of account audited, he can opt for presumptive tax scheme under section 44AD.
Profits and gains from business under section 44AD = ₹ 10,35,000
An eligible assessee opting for computation of profits and gains of business on presumptivR basis under section 44AD in respect of eligible business is required to pay advance tax of the whole amount on or before 15th March of the financial year.
Tax liability of Mr. Madavan as per normal provisions of Income-tax Act, 1961 = ₹ 1,27,920
Accordingly, he is required to pay advance tax of ₹ 1,27,920 on or before 15th March of the financial year. However, any amount by way of advance tax on or before 31st March of the financial year shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of the Act.