Budget: Individuals find it challenging to estimate income and correctly pay the 1st instalment of advance tax by June 15

MUMBAI: The Income-tax (I-T) Act prescribes for payment of advance taxes if a taxpayer’s liability is more than Rs. 10,000. Salaried individuals typically disclose their total income (including the non-salary portion, such as bank interest, rent etc) to their employer, who then accordingly deducts tax at source, each month. If not, they have to ensure advance taxes are duly paid as the tax deducted at source by the employer would not cover the entire tax liability. Non salaried, have to meticulously compute and pay their own advance taxes.
The Bombay Chartered Accountants’ Society (BCAS) in its pre-budget memorandum has pointed out that the threshold limit of Rs. 10,000 was last amended by the Finance Act, 2009. Considering the inflation in the economy, there is a need to increase this limit to a more realistic figure.

Advance tax payable

Deepak R. Shah, chartered accountant and chairperson of the taxation committee at the BCAS adds, “The requirement to pay advance tax in four instalments (refer graphic), which was only for corporate entities was introduced for non-corporate taxpayers, by the 2016 budget.”


“It is quite difficult for individuals, such as gig-workers who have either not opted for the presumptive tax or are not eligible for it, to estimate the total income and pay an advance tax of 15% by end June, which is a mere 75 days from the commencement of the financial year. The pandemic, which in several sectors has slowed down revenue streams and made income flows erratic, makes income estimation even more difficult. For their default, taxpayers are burdened with interest under section 234C, which stipulates an interest at the rate of one per cent per month on the shortfall, until the next instalment which falls due after three months,” adds Shah.
BCAS has also represented that the requirement to pay 15% advance tax by June 15, should be removed for non-corporate taxpayers.

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