Do we need to pay any advance tax for trading income before actually filing ITR?

@Quicko is this right way to calculate advance tax

Hi @anon1649903,

Advance Tax should be paid after calculating income for each quarter. So if you have earned profit of INR 50 lacs upto 15th June, you must calculate and pay advance tax as 15% of tax liability. The tax is calculated at slab rates i.e. INR 13,65,000 (13,12,500 + 52,500 Cess). You must pay advance tax at 15% of such tax liability = 1365000 * 15% = INR 2,04,750.

In the next quarter, tax liability should be calculated on actual earnings of 2 quarters and 45% of tax liability should be paid by 15th September.

You can calculate your Advance Tax using the calculator here - Advance Tax Calculator

1 Like

So to have better understanding.
What if in the next (2nd) quarter income is 30 lac …where due date is 15th sept and 45% of tax liability
You said for the first quarter it is 15% of 50 lac in this example …but than for second quarter we have to add 30 lac…so total will be 80 lac and 45% of applicable tax?

Hey @curiousvi

For your better understanding, this is how you calculate advance tax:
Step 1: Estimate your yearly total income
Step 2: Calculate your total tax liability for the year
Step 3: Make quarterly payments as mentioned below

Due date of instalment Advance Tax payable by Individual and Corporate Taxpayers
On or before 15th June 15% of the tax liability
On or before 15th September 45% of the tax liability
On or before 15th December 75% of the tax liability
On or before 15th March 100% of the tax liability

In your case, in the 1st quarter, you expected your yearly income as 200 lakhs, so up to 15th June, you were supposed to pay 15% of tax liability of 200 lakhs. Now, coming to 2nd quarter, your expectation of yearly income changes based on the fact that you earned only 30 lakhs in quarter 2, so up-to 15th September you need to pay 45% of re-estimated yearly total income.

Hope this helps! :slight_smile:

@Quicko
Suppose we have paid extra tax and now waiting refund, then will the IT Dept give refund along with the interest or without interest for that period ?

You will get Interest on refund if your refund is 10% or more of the total tax paid.

Further, if the refund is out of any advance tax paid or tax deducted at source during the financial year, then interest @ the rate of 0.5% p.m. shall be paid starting from the 1st April of the assessment year till the date of grant of the refund.

If the refund is out of any tax, other than advance tax or tax deducted at source, then interest shall be paid from the date of payment of such tax till the date of the grant of the refund.

Hey @Stonecold

Interest on an income tax refund is payable by the income tax department mandatorily if the refund is 10% or more of the tax paid. Section 244A deals with interest on income tax refund and provides for interest at the rate of 0.5% per month or part of the month on the refund amount.

Such interest shall be calculated from April 1st of assessment year till the date of grant of refund if a refund is due to excess advance tax paid or TDS.

Further, if the refund is out of any tax paid, other than advance tax or tax deducted at source, then interest shall be paid from the date of payment of such tax till the date of the grant of the refund.

Hope this helps! :slight_smile:

@Quicko
Can we file ITR on our own for trading income/loss from your website without paying any charges ?

Hey @Stonecold

ITR 1 and ITR 4 are completely on Quicko. You can directly import your trading income on Quicko by logging into your Zerodha Kite account. Here’s a webinar we did with Zerodha, where we walk through the whole process.

Like always, we have special discounts for Zerodha traders😉

You can also redeem your Zerodha referral rewards points for unlocking free DIY ITR filing on Quicko🙂

I think there is a problem with advance tax calculator.

When I enter 5L business income. Advance tax payment liability is 0.

When I enter 100 crore.

You can see image. I think cess and surcharges are missing in this calculator.

Hi @anon1649903,

When your Income is below INR 5 lakh, you are eligible to claim a rebate u/s 87A. Hence, there is no advance tax liability when your Income is less than INR 5lakh.

We are working on integrating surcharge on income above INR 50 Lakh, we’ll keep you posted

Hi @Quicko

Do Income tax department checks in which quarter profit from trading was earned? How do they know if someone has earned in Q1 or Q4 of the financial year?

Ideally if someone started trading in Q4 and made profits then the person should not be charged penalty for not paying advance tax.

I am not sure about income from trading, but we do have to report quarter-wise break-up of capital gains in the ITR. I imagine it will be the same for gains from trading. That is how the IT department knows.

Hi @sachinsp15,

The Income Tax Department has tied up with SEBI to exchange the data and curb tax evasion. From which the ITD might have details like sale value, sale date.

Interest on deferment of payment of advance tax for capital gains has been exempted if you pay 100% of the tax on or before 31st March of the financial year.

1 Like

Can you please share surcharges rate on income tax for FY22.

This page on the Income Tax website mentions about the surcharge rate for Assessment Year 2022-23 (aka FY 2021-2022) -

a . Surcharge : Surcharge is levied on the amount of income-tax at following rates if total income of an assessee exceeds specified limits:-

Assessment Year 2022-23

Range of Income
Rs. 50 Lakhs to Rs. 1 Crore
Rs. 1 Crore to Rs. 2 Crores
Rs. 2 Crores to Rs. 5 Crores
Rs. 5 crores to Rs. 10 Crores
Exceeding Rs. 10 Crores
10%
15%
25%
37%
37%

Note: The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 111A, 112A and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.

However, marginal relief is available from surcharge in following manner-

i. in case where net income exceeds Rs. 50 lakh but doesn’t exceed Rs. 1 Crore, the amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of Rs 50 Lakh by more than the amount of income that exceeds Rs 50 Lakhs.

ii. in case where net income exceeds Rs. 1 crore but doesn’t exceed Rs. 2 crore, marginal relief shall be available from surcharge in such a manner that the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

iii. in case where net income exceeds Rs. 2 crore but doesn’t exceed Rs. 5 crore, marginal relief shall be available from surcharge in such a manner that the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 2 crore by more than the amount of income that exceeds Rs. 2 crore.

iv. in case where net income exceeds Rs. 5 crore, marginal relief shall be available from surcharge in such a manner that the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 5 crore by more than the amount of income that exceeds Rs. 5 crore.

Once you exceed 10 crore. You have to pay 42% tax. Better to form a company.

Hi @Quicko

Does that mean if I have short term capital gains due to stock cash delivery profits (not intraday and not FnO) I can pay the total amount due for all quarters combined in the month of March, 2022 and NOT incur any interest or penalties if I don’t pay advance tax each quarter.

Is my understanding correct?

Thank you for your assistance.

Hello @zerodhahero

Section 234C of Income tax act, specifically excludes the nature of capital gains income from the purview of advance tax interest liability only if tax payer has paid entire amount of tax related to capital gains by the 31st March of the relevant financial year.

Hope, it helps!

2 Likes

not really as for a company you would need nbfc license.