Advance Tax

 Here’s a clear explanation of Advance Tax and Tax Deducted/Collected at Source (TDS/TCS) — two important concepts under the Income Tax Act, 1961 — along with examples.

 1. Advance Tax

 What is Advance Tax?

Advance Tax is the tax paid by an assessee in installments during the financial year, instead of a lump sum at year-end.
It is also called the “pay-as-you-earn” scheme.

 Who Should Pay?

Any person (including individuals, firms, HUFs, companies, etc.) whose tax liability is ₹10,000 or more in a financial year must pay advance tax.

 Due Dates for Advance Tax (Non-corporates):

Due Date

% of Total Tax to be Paid

15th June

15%

15th September

45% (cumulative)

15th December

75% (cumulative)

15th March

100%

(For companies, similar dates apply. Senior citizens without business income are exempt.)

 Example – Advance Tax

Mr. Raj expects to have total taxable income of ₹12,00,000 in FY 2024–25.
Approximate total tax liability = ₹1,35,000 (after rebate and cess).

He should pay advance tax as:

·         By 15 June: ₹20,250 (15%)

·         By 15 Sept: ₹40,500 (additional 30%)

·         By 15 Dec: ₹40,500 (additional 30%)

·         By 15 March: ₹33,750 (remaining 25%)

 2. Tax Deducted at Source (TDS) / Tax Collected at Source (TCS)

 What is TDS?

TDS is the amount of tax deducted by the payer (like employer, bank, contractor) before making payment to the payee.
It ensures tax collection at the source of income.

 What is TCS?

TCS is the tax collected by the seller while receiving payment from the buyer for specific goods or services (like scrap, tendu leaves, cars, foreign remittance, etc.)

 Common Examples of TDS:

Nature of Payment

TDS Rate

Who Deducts It?

Salary

As per slab

Employer

Interest from bank

10%

Bank

Rent (above ₹2.4 lakh)

10%

Tenant (if individual/HUF liable to audit)

Contractor payment

1% or 2%

Payer of contract

 Common Examples of TCS:

Nature of Transaction

TCS Rate

Collected By

Sale of scrap

1%

Seller

Sale of motor vehicle > ₹10L

1%

Car dealer

Foreign remittance > ₹7L

5%–20%

Authorized dealer / bank

 Example – TDS

·         Mr. Ajay receives ₹50,000 as interest from bank in a year.

·         The bank deducts TDS @10% = ₹5,000 and credits ₹45,000 to Ajay's account.

When Ajay files his return, he can adjust ₹5,000 against his total tax liability.

 Summary

Concept

Advance Tax

TDS / TCS

Paid by

Taxpayer

Deductor (payer of income) / Seller (TCS)

Paid to

Government (directly)

Government (on behalf of payee)

Timing

During the financial year

At the time of income payment / collection

Applicability

If estimated tax > ₹10,000

Based on transaction type & thresholds

Credit Claim

While filing ITR

Shown in Form 26AS / AIS and claimed in ITR

 

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