Do you have to pay an advance tax? Hurry up! March 15 is the last date

Generally, taxes are deducted/collected at source when income is paid. However, as not all income is subject to the TDS and the tax deducted at source may be lower than the applicable slab rate, the balance due must be paid by way of withholding tax. Let’s discuss the withholding tax provisions applicable to individuals.

Who has to pay withholding tax and when?

Any taxpayer whose tax payable, reduced by the amount of TDS and TCS, exceeds Rs. 10,000/- must pay the withholding tax in four instalments, on June 15, September 15, December 15 and March 15 of the financial year in a ratio of 15%, 30%, 30% and 40% respectively. The withholding tax deficit in one of the installments must be offset in the next installment. Thus, if you have not paid a deposit for the current year, the entire deposit can be paid before March 15. With respect to capital gains and dividend income, the anticipated tax liability relating to such income may be discharged in installments falling due after the accumulation of such income.

Persons covered by the flat-rate tax regime under Articles 44AD and 44ADA have the option of paying their withholding tax in a single installment, ie on March 15. If you are an elderly person and have no business or professional income, you are exempt from paying withholding tax which may be paid on the ITR filing due date.

Interest payable for loss of profit or non-payment of withholding tax

For each delay or shortfall in advance tax, you must pay interest @ 1% per month. As the next due date is only due after three months, you effectively pay interest for three months even if there is a one day delay beyond the due date. For example, your advance tax liability is Rs. 1 lakh and failed to pay the rupees. 15,000/- due on June 15, you will have to pay interest of Rs. 450/- for such default even if you paid it on June 16.

Any withholding tax paid before March 31 of the same year is also treated as withholding tax. So if you don’t pay the March 15 installment, or even if you paid the March 15 installment but find a shortfall, you can still pay it by March 31, 2022, but you’ll have to pay penalty interest @ 1% for one month in addition to the interest you must pay for any shortfall in previous installments.

What will happen if the anticipated tax debt is not paid by March 31 of the financial year

If you are unable to pay the full withholding tax, you can still pay it but under another name of self-assessment tax with a cost. In the event of non-payment or underpayment of withholding tax, you must pay interest @ 1% for the month or part of the month from April 1 of the following year until you actually pay the self-assessment tax. No interest is payable if the shortfall does not exceed 10% of your overall tax payable. This is in addition to interest due for non-payment of withholding tax during the year.

It is important to know that in case of default or insufficient payment of the withholding tax, in addition to interest @ 1% from April 1st until the date of effective payment of the self-assessment tax , you may also have to pay penalty interest for late filing of your ITR beyond the due date which is usually July 31 for employees and most taxpayers. This interest is payable for the period from the due date of the ITR until the effective date of issuance of the declaration. This interest is payable even if you have already paid the self-assessment tax by the tax return filing due date.

What happens if you pay more withholding tax than your tax payable

If you pay more tax, either through withholding tax or TDS, than your actual tax payable, you can claim a refund of the excess tax paid, but you will need to file your ITR to get that refund. In addition, you are entitled to obtain interest at the rate of 6% per annum on this excess tax paid.

Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on Twitter.

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