Section 208 Imposition of Advance Tax and Self-Assessment under Indian Income Tax Act: A Case Law
The Indian Income Tax Act, 1961, governs the taxability of income earned by individuals and businesses in India. One of the important aspects it covers is the requirement of payment of advance tax and the implications of non-compliance. In this analysis, we focus on a case where the Assessee did not pay any advance tax but opted for self-assessment tax payment.
Facts of the Case:
The Assessee, during the financial year 2016-17, estimated his income and calculated his tax liability to be around Rs. 20,000/-. He did not remit any installment of advance tax as outlined under the Income Tax Act and had no Tax Deducted at Source (TDS). Instead, he paid the entire tax as self-assessment tax and filed his returns before the due date.
The primary issue at hand is to understand how an Assessing Officer (AO) will evaluate this situation and impose tax according to the provisions of the Income Tax Act.
Rule of Law: Section 208 Imposition of Advance Tax and Self-Assessment
As per Section 208 of the Income Tax Act, an individual is liable to pay advance tax if his tax liability for the year exceeds Rs. 10,000/-. The advance tax should be paid in quarterly installments as specified under section 211. Failure to pay advance tax or delay in payment attracts interest under Section 234B and Section 234C of the Act. However, if the taxpayer has no TDS and pays the full amount as self-assessment tax before filing his return, this may have implications on the tax assessment.
Application and Discussion:
Advance tax, as the name suggests, is the tax that one needs to pay in advance, rather than paying the full amount at the end of the fiscal year. As per Section 208, an individual whose estimated tax liability for the year is Rs.10,000 or more, he/she will be liable to pay tax in advance.
Interest on Delayed Advance Tax
If the Assessee fails to pay advance tax or pays less than the statutory percentage of advance tax, he is liable to pay interest under Section 234B and Section 234C. However, in this case, since the Assessee has paid his entire tax liability before filing his return, the provision of
Section 234B may not apply.
As per Section 140A, a taxpayer, while submitting his income tax return, shall pay tax or interest as per his assessment. This is called self-assessment tax. In the present case, the Assessee has fulfilled this requirement by paying his entire tax liability as self-assessment tax before filing the return.
Assessing Officer's Discretion
While passing the assessment order, the Assessing Officer will consider whether the Assessee had any tax liability that wasn't covered by TDS or advance tax. In this case, since the Assessee has paid the entire tax as self-assessment tax before filing the return, it is expected that the AO would not impose any additional tax.
In conclusion, the Assessee in this case, despite not paying the advance tax, has complied with the provisions of the Income Tax Act by paying his entire tax liability as self-assessment tax before filing his return. The AO is expected not to impose any additional tax or interest under sections 234B and 234C given the Assessee's compliance with the law. This case underlines the importance of understanding the nuanced rules of section 208 imposition of advance tax, self-assessment tax, and interest provisions for efficient tax planning and compliance.