ADVANCE PAYMENT OF TAX

OR
PAY AS YOU EARN SCHEME
SECTION 207 TO 219
Liability !" #ay$%&t ! a'(a&)% ta* S%)ti!& 207
Tax shall be payable in advance during any financial year, in accordance with the provisions
of sections 208 to 219, in respect of the total income of the assessee which would be
chargeable to tax for the assessment year immediately following that financial year.
dvance tax shall not be payable by an individual resident in !ndia, who"
#a$ does not have any income chargeable under the head %&rofits and gains of business or
profession'( and
#b$ is of the age of sixty years or more at any time during the previous year.
s per section 208, every person in whose case tax payable #tax payable ) tax liability * T+,$
during the year is ` 10+000 !" $!"%, has to estimate his tax payable and it is to be paid in the
manner given under section 211 and for this purpose various assessee shall be divided into
two categories as given below -
1, C!$#a&y a--%--%%
company assessee has to pay advance tax in the manner given below.
/pto 10
th
1une of 2inancial 3ear not less than 104 of tax payable
/pto 10
th
,eptember of 2inancial 3ear not less than 504 of tax payable
/pto 10
th
+ecember of 2inancial 3ear not less than 604 of tax payable
/pto 10
th
7arch of 2inancial 3ear 1004 of tax payable
Example
2or the previous year 2012*18, 9: ;td. has estimated its tax payable to be `2,00,000, in
this case advance tax shall be paid by the company as given below.
/pto 10.0<.2012 80,000
/pto 10.09.2012 90,000
/pto 10.12.2012 1,00,000
/pto 10.08.2018 2,00,000
2, A&y !t.%" a--%--%%
ny other assessee has to pay advance tax in the manner given below.
/pto 10
th
,eptember of 2inancial 3ear not less than 804 of tax payable
/pto 10
th
+ecember of 2inancial 3ear not less than <04 of tax payable
/pto 10
th
7arch of 2inancial 3ear 1004 of tax payable
Example
7r. =a> ?umar has estimated his tax payable for previous year 2012*18 `1,00,000, in this
case he should pay advance tax in the manner given below.
/pto 10.09.2012 80,000
/pto 10.12.2012 <0,000
/pto 10.08.2018 1,00,000
I&t%"%-t !" '%%"$%&t ! a'(a&)% ta* S%)ti!& 2/0C
!f any person has failed to pay advance tax, such person has to pay interest under section
285: at a rate of 14 per month for a period of 8 months on the amount of default but for the
last installment interest is to be paid only for one month.
!f the advance tax paid by the company 1#t! 12
t.
31&% i- 124 of the tax payable and 1#t!
12
t.
S%#t+ it i- /54 of the tax payable, in such cases no interest shall be charged for default
in such instalment.
Ill1-t"ati!& 16 9: ;td. has estimated its tax payable to be `1,00,000 and the company has
paid advance tax as given below.
/pto 10.0<.2012 10,000
/pto 10.09.2012 50,000
/pto 10.12.2012 60,000
/pto 10.08.2018 1,00,000
@owever, the company has computed its tax payable to be `1,80,000 at the time of filing the
return of income. :ompute interest payable by the company under section 285:
S!l1ti!&6
!nstallments if tax payable is `1,80,000
`
10.0<.2012 26,000 - 10,000 ) 12,000 x 14 x 8 ) 8<0
10.09.2012 81,000 - 50,000 ) 8<,000 x 14 x 8 ) 1,080
10.12.2012 1,80,000 - 60,000 ) <0,000 x 14 x 8 ) 1,800
10.08.2018 1,80,000 - 1,00,000 ) 80,000 x 14 x 1 ) 800
Total !nterest &ayable 5,050
The interest so computed has to be paid at the time of self assessment i.e. at the time of filing
the return of income. The amount of tax payable should be paid as advance tax and if there is
any deficiency, it should be paid upto 81
st
7arch of that particular previous year otherwise
assessee has to pay interest under section 2859 also and if tax is paid after the last date of
filing the return of income, assessee has to pay interest under section 285 also.
Ill1-t"ati!& 26 7r. &radeep :hauhan has estimated his tax liability to be `1,80,000 and has
paid advance tax accordingly but subseAuently his tax liability was found to be `1,90,000, in
this case, interest payable by him under section 285: shall be
`
10.09.2012 06,000 - 50,000 ) 1<,000 x 14 x 8 ) 590
10.12.2012 1,15,000 - 81,000 ) 88,000 x 14 x 8 ) 990
10.08.2018 1,90,000 - 1,80,000 ) 00,000 x 14 x 1 ) 000
Total !nterest &ayable 2,080
I&t%"%-t !" #ay$%&t ! i&)!$% ta* at%" %*#i"y ! "%l%(a&t #"%(i!1- y%a" S%)ti!& 2/07
!f any person has paid income tax after expiry of the relevant previous year, in such cases
interest is payable B 14 #,$, !" #a"t ! t.% $!&t. !" t.% #%"i!' -ta"ti&8 "!$ 1
-t
A#"il
! a--%--$%&t y%a" 1#t! t.% 'at% ! #ay$%&t, provided advance tax paid is less than 904
of the tax liability i.e. if the advance tax paid is 904 or more, interest under section 2859
shall not be payable. e.g. !f for the previous year 2012*18, income tax paid upto 81.08.2018 is
`2,00,000 but actual tax liability is `8,00,000 and difference amount of `1,00,000 has been
paid on 10.06.2018, in this case interest payable under section 2859 shall be
1,00,000 x 14 x 5 ) `5,000
I&t%"%-t !" #ay$%&t ! i&)!$% ta* at%" %*#i"y ! t.% la-t 'at% ! ili&8 t.% "%t1"& !
i&)!$% S%)ti!& 2/0A
!f any person has paid income tax after expiry of the last date of filing of return of income,
interest shall be payable B 14 p.m. or part of the month for the period subseAuent to the last
date of filing of return of income. C.g. !f in the above case, income tax of `1,00,000 has been
paid on 10.12.2018 and last date of filing of return of income is 80.09.2018, in this case
interest payable under section 285 shall be
1,00,000 x 14 x 8 ) `8,000
lso the assessee has to pay interest under section 2859 and interest payable under section
2859 shall be
1,00,000 x 14 x 9 ) `9,000
Ill1-t"ati!& /6 9: ;td. has tax liability of `6,00,000 for the previous year 2012*18 and the
company has not paid any advance tax and entire tax amount was paid by the company on
81.12.2018. !n this case, interest shall be calculated in the manner given below.
1, I&t%"%-t i& )a-% ! '%a1lt9&!&:#ay$%&t ! a'(a&)% ta* -%)ti!& 2/0C

`
+efault in instalment payable on 10.0<.2012 1,00,000 x 14 x 8 ) 8,100
+efault in instalment payable on 10.09.2012 8,10,000 x 14 x 8 ) 9,500
+efault in instalment payable on 10.12.2012 0,20,000 x 14 x 8 ) 10,600
+efault in instalment payable on 10.08.2018 6,00,000 x 14 x 1 ) 6,000
Total interest payable 80,800
2, I&t%"%-t i& )a-% ! #ay$%&t ! ta* at%" t.% %&' ! "%l%(a&t #"%(i!1- y%a" -%)ti!& 2/07
6,00,000 x 14 x 9 ) <8,000
/, I&t%"%-t i& )a-% ! #ay$%&t ! ta* at%" t.% la-t 'at% ! ili&8 ! "%t1"& ! i&)!$%
-%)ti!& 2/0A
6,00,000 x 14 x 8 ) 21,000
Total !nterest &ayable 1,19,800
I&t%"%-t !& R%1&'- S%)ti!& 200A
!f any assessee is eligible for refund, he will be allowed interest B 0.04 per month or part of
the month from the 1st pril of the assessment year upto the date on which the refund is
granted however no interest is payable if the amount of refund is less than 104 of the tax
liability.
Example
2or the previous year 2012*18, 9: ;td. has paid advance tax of `0,00,000 but actual tax
liability of the company is `8,00,000 and a refund of `2,00,000 was granted on 10.06.2018,
in this case interest payable to the assessee shall be
2,00,000 x 0.04 x 5 ) `5,000
!f in the above case actual tax liability is `5,80,000, no interest is payable because the amount
of refund is less than 104 of the tax liability.
U&'%":%-ti$ati!& ;it. "%8a"' t! Ca#ital <ai&-9 Ca-1al I&)!$% S%)ti!& 2/0C
!f any person has not paid advance tax or has defaulted in payment of advance tax because of
not estimating or because of under*estimating any capital gain or any income covered under
section 2#25$#ix$ i.e. casual income, no interest shall be payable under section 285: provided
assessee has paid the tax correctly in the subseAuent installment after accrual of such income.
Example
2or the previous year 2012*18 9: ;td. has estimated its tax payable to be `1,00,000 and
has paid the installment on 10.0<.2012 and 10.09.2012 accordingly, but subseAuently the
company had long term capital gain of `1,00,000 on 01.10.2012 and it was not estimated by
the company, in this case, if additional tax liability of `20,000 plus C: has been paid by the
company in the subseAuent installments in the prescribed manner, in that case, no interest
shall be charged under section 285: for the default in the earlier installments.
R!1&'i&8 ! !" t.% #1"#!-% ! )al)1lati&8 I&t%"%-t R1l% 119A
s per rule 119, the principal amount shall be rounded off in the multiples of `100 and for
this purpose any fraction of `100 shall be ignored. C.g. `1,<0,260 shall be rounded off as
1,<0,200.
Ill1-t"ati!& 06 7r. D has paid advance tax as given below.
/pto ,eptember 10, 2012
`50,000
/pto +ecember 10, 2012
`90,000
@e has not estimated any capital gain but he had long term capital gains of `8,00,000 on
01.01.2018. @e has paid advance tax upto 10
th
7arch 2018 `1,60,000.
@is actual income other than capital gains was found to be `11,00,000.
@e has filed return of income on 10.12.2018 and has paid difference of the tax on 10.12.2018.
;ast date for filing of return is 81.06.2018.
:ompute interest payable under section 285, 2859 and 285:.
S!l1ti!&6
C!$#1tati!& ! Ta* Liability
`
Eormal !ncome
11,00,000
;ong term capital gains
8,00,000
Total !ncome
15,00,000
Tax on `11,00,000 at slab rate
1,<0,000
Tax on `8,00,000 B 204
<0,000
dd. Cducation cess B 24
5,500
dd. ,@C: B 14
2,200
Tax ;iability
2,2<,<00
#Tax liability excluding capital gains `11,00,000 at slab rate F C: B 84
1,<5,800$
I&t%"%-t 1&'%" -%)ti!& 2/0C
,ince capital gains arises on 1
st
1anuary 2018, installments for 10
th
,eptember and 10
th
+ecember shall be checGed without including tax on capital gain and shall be as given below.
A$!1&t
#ayabl% a-
a'(a&)% ta*
A$!1&t a)t1ally
#ai' by ;ay !
a'(a&)% ta*
S.!"tall I&t%"%-t
` ` ` `
/pto ,eptember 10,
2012
#1,<5,800 x 804$
59,550 50,000 5,550
#5,500 x 14 x
8$
182
/pto +ecember 10,
2012
#1,<5,800 x <04$
98,880 90,000 8,880
#8,800 x 14 x
8$
115
!nstallment for 10
th
7arch shall be including tax on capital gains and is as given below.
A$!1&t
#ayabl% a-
a'(a&)% ta*
A$!1&t a)t1ally
#ai' by ;ay !
a'(a&)% ta*
S.!"tall I&t%"%-t
` ` ` `
/pto 7arch 10, 2018
#2,2<,<00 x 1004$
2,2<,<00 1,60,000 0<,<00
#0<,<00 x 14 x
1$
0<<
I&t%"%-t #ayabl% 1&'%" -%)ti!& 2/0C
` 812
I&t%"%-t 1&'%" -%)ti!& 2/07
0<,<00 x 14 x 9
`0,095
I&t%"%-t 1&'%" -%)ti!& 2/0A
0<,<00 x 14 x 0
`2,880
Ill1-t"ati!& 26 partnership firm made the following payments of advance tax during the
financial year 2012*18.

`
/pto ,eptember 10, 2012
8,20,000
/pto +ecember 10, 2012
1<,<5,000
/pto 7arch 10, 2018
2<,28,000
The income returned by the firm is `88,00,000 under the head %profits and gains of business
or profession' and `9,00,000 by way of long term capital gains on sale of a property effected
on +ecember 1, 2012. Hhat is the interest payable by the assessee under section 2859 and
section 285: for assessment year 2018*15I ssume that the return of income was filed on
80.09.2018 i.e. the due date and tax was fully paid on self assessment.
S!l1ti!&6
C!$#1tati!& ! Ta* Liability
`
9usiness income
88,00,000
;ong term capital gains
9,00,000
Total !ncome
96,00,000
Tax on `88,00,000 B 804
2<,50,000
Tax on `9,00,000 B 204
1,90,000
dd. Cducation cess B 24
0<,<00
dd. ,@C: B 14
28,800
Tax ;iability
29,15,900
#Tax liability excluding capital gains `88,00,000 x 804 F C:B 84
26,19,200$
I&t%"%-t 1&'%" -%)ti!& 2/0C
,ince capital gains arises on 1
st
+ecember 2012, installment for 10
th
,eptember shall be
checGed without including tax on capital gain and shall be as given below.
A$!1&t
#ayabl% a-
a'(a&)% ta*
A$!1&t a)t1ally
#ai' by ;ay !
a'(a&)% ta*
S.!"tall I&t%"%-t
` ` ` `
/pto ,eptember 10,
2012
#26,19,200 x 804$
8,10,6<0 8,20,000 Eil Eil
!nstallments for 10
th
+ecember and 10
th
7arch shall be including tax on capital gains and is
as given below.
A$!1&t
#ayabl% a-
a'(a&)% ta*
A$!1&t a)t1ally
#ai' by ;ay !
a'(a&)% ta*
S.!"tall I&t%"%-t
` ` ` `
/pto +ecember 10,
2012
#29,15,900 x <04$
16,58,950 1<,<5,000 85,950
#85,900 x
14 x 8
month$
2,056
/pto 7arch 10, 2018
#29,15,900 x 1004$
29,15,900 2<,28,000 2,91,900
#2,91,900 x
2,919
14 x 1
month$
I&t%"%-t #ayabl% 1&'%" -%)ti!& 2/0C
`0,5<<
I&t%"%-t 1&'%" -%)ti!& 2/07
2,91,900 x 14 x <
`16,015
P!;%"- ! t.% A--%--i&8 Oi)%" t! 'i"%)t a #%"-!& t! #ay A'(a&)% Ta* S%)ti!& 209+ 210
!f any person has been assessed through regular assessments and such person has not paid
any advance tax, in such cases ssessing officer may issue a notice #2orm Eo. 28$ to such a
person to pay advance tax but such orders can be passed maximum upto last day of 2ebruary
of that year.
/nder section 2#50$, =egular ssessment includes
#i$ ,crutiny ssessment 158#8$
#ii$ 9est 1udgment ssessment 155.
!f the ssessing officer has issued a notice for payment of advance tax, the income to be
taGen into consideration shall be the income of the latest previous year in which the assessee
was assessed through regular assessment but if any return of income has been filed by the
assessee subseAuently and income reported is higher than the assessed income, in such cases
income reported by the assessee shall be taGen into consideration.
Example
2or the previous year 2012*18, 9: ;td. has not paid any advance tax till 10.10.2012 and in
the earlier years the company was assessed in the manner given below.
2009*10 158#8$ #,crutiny ssessment$ 6,00,000
2010*11 155 #9est 1udgement ssessment$ 10,00,000
2011*12 =J! 8,00,000
!n this case ssessing officer shall have the powers to give notice to the assessee and its
estimated income shall be considered to be `10,00,000. !f any assessee has received a notice
in form no. 28 but he finds that his tax liability shall be less than the amount computed by the
ssessing Jfficer, in that case he can give a reply in form no. 28 and can pay tax as per his
own estimate.
s per section 218, if any assessee does not pay, any instalment of the advance tax that he is
reAuired to pay by an order of the ssessing Jfficer and does not send to the ssessing
Jfficer an intimation #form no. 28$ or does not pay on the basis of his estimate of his
current income the advance tax payable by him, he shall be deemed to be an assessee in
default and penalty may be imposed eAual to the amount of income tax which he was
reAuired to pay.
Ill1-t"ati!& 56 =a> 9: ;td. has estimated its tax liability for assessment year 2018*15
`5,50,000 and has paid advance tax accordingly but actual tax liability was found to be
`10,00,000.
The company has paid balance amount on 02.01.2015.
:ompute interest payable under section 285, 2859, and 285:.
S!l1ti!&6
Tax payable is `5,50,000
/pto 10.0<.2012 <<,000
/pto 10.09.2012 1,98,000
/pto 10.12.2012 8,80,000
/pto 10.08.2018 5,50,000
I&t%"%-t i& )a-% ! '%a1lt9&!&:#ay$%&t ! a'(a&)% ta* -%)ti!& 2/0C
!nstallments if tax payable is `10,00,000

`
10.0<.2012 1,00,000 - <<,000 ) 85,000 x 14 x 8 ) 2,020
10.09.2012 5,00,000 - 1,98,000 ) 2,02,000 x 14 x 8 ) 6,0<0
10.12.2012 6,00,000 - 8,80,000 ) 5,20,000 x 14 x 8 ) 12,<00
10.08.2018 10,00,000 - 5,50,000 ) 0,<0,000 x 14 x 1 ) 0,<00
Total interest payable uKs 285: 28,280
I&t%"%-t i& )a-% ! #ay$%&t ! ta* at%" t.% %&' ! t.% "%l%(a&t #"%(i!1- y%a" -%)ti!&
2/07
10,00,000 - 5,50,000 ) 0,<0,000
`
0,<0,000 x 14 x 10 )
0<,000
I&t%"%-t i& )a-% ! #ay$%&t ! ta* at%" t.% la-t 'at% ! ili&8 ! "%t1"& ! i&)!$% -%)ti!&
2/0A

`
0,<0,000 x 14 x 5 )
22,500
Total interest payable #28,280 F 0<,000 F 22,500$
1,0<,<80
=b> &resume in the above Auestion actual tax liability is `0,00,000.
S!l1ti!&6
I&t%"%-t i& )a-% ! '%a1lt9&!&:#ay$%&t ! a'(a&)% ta* -%)ti!& 2/0C
!nstallments if tax payable is `0,00,000
10.0<.2012 60,000 - <<,000 ) 9,000 285: is Eil, because advance tax paid is 124 or
more.
10.09.2012 2,20,000 - 1,98,000 ) 26,000 285: is Eil, because advance tax paid is 8<4 or
more.
10.12.2012 8,60,000 - 8,80,000 ) 50,000 x 14 x 8 ) `1,800
10.08.2018 0,00,000 - 5,50,000 ) <0,000 x 14 x 1 ) ` <00
Total interest payable uKs 285: `1,900
I&t%"%-t i& )a-% ! #ay$%&t ! ta* at%" t.% %&' ! t.% "%l%(a&t #"%(i!1- y%a" -%)ti!&
2/07

`
0,00,000 - 5,50,000 ) <0,000
<0,000 x 14 x 10 )
<,000
I&t%"%-t i& )a-% ! #ay$%&t ! ta* at%" t.% la-t 'at% ! ili&8 ! "%t1"& ! i&)!$% -%)ti!&
2/0A

`
<0,000 x 14 x 5 )
2,500
Total interest payable #1,900 F <,000 F 2,500$
10,800
=)> &resume in the above Auestion actual tax liability is `5,<0,000.
S!l1ti!&6
I&t%"%-t i& )a-% ! '%a1lt9&!&:#ay$%&t ! a'(a&)% ta* -%)ti!& 2/0C
!nstallments if tax payable is `5,<0,000
10.0<.2012 <9,000 - <<,000 ) 8,000 285: is Eil, because advance tax paid is 124 or
more.
10.09.2012 2,06,000 - 1,98,000 ) 9,000 285: is Eil, because advance tax paid is 8<4 or
more.
10.12.2012 8,50,000 - 8,80,000 ) 10,000 x 14 x 8 ) `500
10.08.2018 5,<0,000 - 5,50,000 ) 20,000 x 14 x 1 ) `200
Total interest payable uKs 285: `<00
I&t%"%-t i& )a-% ! #ay$%&t ! ta* at%" t.% %&' ! t.% "%l%(a&t #"%(i!1- y%a" -%)ti!&
2/07
!t is exempt because advance tax paid is 904 or more of actual tax.
I&t%"%-t i& )a-% ! #ay$%&t ! ta* at%" t.% la-t 'at% ! ili&8 ! "%t1"& ! i&)!$% -%)ti!&
2/0A

`
20,000 x 14 x 5 )
800
Total interest payable #<00 F 800$
1,500
='> &resume in the above Auestion actual tax liability is `8,80,000 and return of income was
filed on 01.0<.2018 and refund was granted on 10.06.2018.
S!l1ti!&6
`
!nterest in case of defaultKnon*payment of advance tax section 285:
Eil
!nterest in case of payment of tax after the end of the relevant previous year section 2859
Eil
!nterest in case of payment of tax after the last date of filing of return of income section 285
Eil
!nterest refund under section 255 #<0,000 x 0.04 x 5$
1,200