Thursday, March 15, 2012

Advance Tax also payable By salaried employee on other Income

on Thursday, March 15, 2012

Person is salaried, company deducts tax at source and he falls under 30% slab.He has interest income from bank FDs and tax liablity on this crosses 10,000/- mark. Bank is already deducting 10% TDS.Now, should the person pay remaining 20% tax on FD interest as Advanced tax i.e. before 31 Mar of previous year or as self-assessment during Apr-Jul of Assessment year?

Advance tax for person other than companies is payable if tax due in a financial year is more than 10000 before the TDS amount .Such person have to pay advance tax in three installments. 

  •  30% of tax assessed =15 September of previous year(for Ay 2012-13date is 15.09.2011) 
  • 60% of tax assessed=15 December of previous year ( For Ay 2012-13 Date is 15.12.2011 
  • 100% of tax assessed = 15 March of previous year (For Ay 2012-13 date is 15.03.2012) 

Here tax Assessed means = Tax due minus Tax deducted at sources.Please note that to check 10000 cut off limit you have to consider full amount of tax due but for interest calculation amount is to be taken is total tax due minus tax deducted/ collected at source(TDS/TCS).    

Advance Tax is payable if tax liability before TDS is more than 10000 ,in your case person fall under 30% slab but tds has already been deducted from salary income but bank has deducted 10 % TDS only where as person falls under 30%  .so In above case to check limit of advance tax tax payable before tds is to be checked which is more than 10000 .Therefore , he definitely falls under advance tax liability and he should pay advance tax today it self.if not possible than pay by 31 March.

So as per rule he must deposit balance amount as advance tax ,otherwise he have to pay interest u/s 234C and 234B .in fact 234C remains applicable even if he pays advance tax now as he has failed to pay installment 1 and 2 . 

However he has a option to declare his other income to employer so that tds including other income be deducted by the employer ,if he adopts this option interest u/s 234B and 234C will not be applicable.

Lets assume he tax Liability from bank is 12000 & bank has already deducted 4000 and net tax payable is 8000.

1,If he pays advance tax today then interest u/s 234 C is as under

first installment 15 September       :8000*30%* 3months *1% per month=72 Rs
Second installment 15 December:8000*60% *3 months *1 % per month=144Rs
Total Interest =72+144 u/s 234C=216

2.If he pay advance tax by 31 March 

first installment 15 September       :8000*30%* 3months *1% per month=72 Rs
Second installment 15 December:8000*60% *3 months *1 % per month=144Rs
Third Installment 31st December :8000*100%*1 Month*1% per month=80
Total Interest =72+144 +80u/s 234C=216+80=296 Rs

3.If he pays Self assessment tax in Apl to July 

he has to pay 80 Rs interest(1 % per month) for each  month u/s 234B  plus interest u/s 234C =296 Rs

4.If he declare his income to employer  

If he declare his income to employer and employer deduct balance tax of FDR interest income then no tax u/s 234B and C applicable.


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