The assessee had a taxable income for financial year 2009-10 where the tax liability is more than 10,000. He did not pay any advance tax as envisaged under the Act. He has paid the tax by self assessment and filed his return in time. As an assessing officer while assessing and passing the orders how you will impose the tax?
1. Whether assessee is liable if the tax is above Rs. 10,000/-? YES
2. Whether assessee is liable for penalty? YES
Section 2 (1) of the Income Tax Act, 1961. Advance tax is the income tax payable if your tax liability is more than Rs. 10,000/- in a financial year. It should be paid in the year in which the income is received.
This problem is related to the payment of advance tax. While calculating Advance Tax payable, a taxpayer needs to make only a projection or estimate of his income, as the actual income could be calculated only by the fiscal year end.
a) Using the projected income for the fiscal year, the tax payable is to be calculated as per the tax slabs applicable for the current financial year.
b) From the tax so computed, subtract the tax deducted at source, if any.
c) Include educational cess while calculating advance tax.
In the instant case the tax liability for the year is Rs. 10,000/- and no advance tax was paid. Since the year under review pertaining to the Assessment year 2010-11, Education Cess @ 2% and Secondary &Higher Education Cess @1% is also applicable on the total tax computed. Hence, the total Tax Liability will be works out to Rs. 10300/-. If the Advance Tax is not paid as the installments in time, then penalty will be charges @1% simple interest for the next 3 months on the amount shortfall, under Section 234 C of the Income Tax Act, 1961, which is purely due to the delay in paying the due Advance Tax Amount. Further, If the Advance Tax is not paid at all before 15 March, or paid less than 90% of the total liability, then the penalty under Section 234B will be levied @1% per month on the balance amount due, for every month till the date of complete payment.
In the instant problem, the assessee is liable if the tax is above Rs. 10,000/-. From the amounts paid by the assessee, any amount due on account of interest shall be appropriated first and the balance shall be given credit as tax paid for the year concerned. Hence the assessee is liable for penalty under Section 234 B&C of the Act.
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