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.
@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.
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.
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
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
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.
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.
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.
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.
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.
Hello, @Quicko
What is advance tax requirement for speculative income ?
Should 1) speculative income ( equity intraday ) + 2) STCG + 3) LTCG all paid for by march 31st still attract advance tax penalty ?
Last year most of my income was from intraday equity along with smaller LTCG/STCG from equity/debt.
From what i understood, interest is not charged for advance tax shortfall as long as i pay in full before the FY ends.
Ex from https://www.indiafilings.com/learn/section-234c-of-income-tax-act/
“Interest under Section 234C is not applicable in the event of underestimation or failure in valuing the amount of capital gains or speculative income such as lottery income, gambling income, and the likes of it.”
Last year bulk of my tax liability happened in last 3 months of the year. I paid in few installments in Feb and march and paid about 5k more than my liability by March 31. I did miss out on advance tax in dec quarter when my tax situation was much lower and i was in middle of extended Drawdown ( so losses could have increased reducing income in March)
Now, ITR3 form is showing that i have to pay about 4.6% as interest in “c. Interest for deferment of advance tax(section 234C)”.
rant - govt cant estimate their own deficit numbers but Expect others to magically know the future.
As an extreme example, say below is overall situation for year till date at the end of each quarter
Jun15/Sept 15 : LTCG 2L, total income from all sources including CG less than 5L.
Dec 15. LTCG of 2L, speculative income 10L
March 15 LTCG 2L, STCG 2L, speculative income 50L
March 31 LTCG 2L, STCG 2L, speculative income 60L
If i pay in this way, will it still attract interest
Jun15/Sept 15 : No advance tax
Dec 15: 75% of tax on 10L
March 15: 100% of tax on 50L
March 31 : 100% of tax on 60L + 100% of applicable tax on CG
Otherwise, advance tax will become just another cess like tax that we have to pay as there is no way to predict future profits ( and losses ) in trading.
If the tax liability of the trader on income earned from trading in F&O and Intraday segment is expected to exceed Rs. 10,000, then they must calculate and pay Advance Tax. This is so as to avoid Interest under Section 234B and 234C. Advance Tax is to be paid in quarterly installments on 15th June, 15th September, 15th December, and 15th March.
As per Income Tax Act, The trader should be able to determine the taxable income for year, calculate tax liability accordingly, and make payment of Advance Tax online.
If you pay in the way you mentioned, It will still attract interest.
