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

I know.

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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

  1. Jun15/Sept 15 : LTCG 2L, total income from all sources including CG less than 5L.
  2. Dec 15. LTCG of 2L, speculative income 10L
  3. March 15 LTCG 2L, STCG 2L, speculative income 50L
  4. March 31 LTCG 2L, STCG 2L, speculative income 60L

If i pay in this way, will it still attract interest

  1. Jun15/Sept 15 : No advance tax
  2. Dec 15: 75% of tax on 10L
  3. March 15: 100% of tax on 50L
  4. 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.

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Hi @SpacemanSpiff

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.

Hope this helps!

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Thanks for your response.
I guess ill consider it as another form of cess and pay advance tax based on current income and possible dd risk.

@Quicko : just to get this clear: In the example that @SpacemanSpiff gave, the interest is charged only because they did not pay advance tax on the speculative (trading) income of 60L. No interest was charged because of non-payment of advance tax on CG, because they did pay 100% of the tax on CG by 31 March. To be more specific, the interest is applied only because they did not pay the following amounts of advance tax:

  • 12% of the tax on 60L of trading income by June 15
  • 36% of the tax on 60L of trading income by Sep 15
  • 75% of the tax on (60L - 10L) = 50L of trading income by Dec 15

(@SpacemanSpiff : the first two percentages are 12 and 36 instead of 15 and 45 because the rules give us this allowance.)

Is this understanding correct? In particular: no interest was charged for delayed payment of advance tax on CG, because they did pay the entire amount of tax by Mar 31. Is this so?

I ask because the link that you provided to your website does not make this clear.

@SpacemanSpiff : The line that you quote from indiafilings.com is somewhat misleading for someone who doesn’t already know the rule, because it could be read as saying that the exemption applies to all speculative income. But this is not so: the exemption applies only to certain specific types of speculative income which are listed in section 2(24)(ix), namely:

any winnings from lotteries, crossword puzzles, races including horse races, 
card games and other games of any sort or from gambling or betting of any 
form or nature whatsoever

(I didn’t know this either, till I went digging after reading your comment.)

Since income from trading, while classified as “speculative”, does not fall into any of the above categories, it does not enjoy this exemption.

This tutorial from the IT department is very readable, and illustrates advance tax and interest charged on non-payment of advance tax.

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In my case, i was charged interest for delayed payment of capital gains.

I know this because, at present itr form is asking for payment before validation ( stupid … )
In my case, i chose to pay, then saw validation error due to not having reduced capital gains in quarterly breakup by adjusting against Carry forward loss of previous year. After reduction, i now have some refund due as interest reduced. Interest calculation is a black box…


repeated rant, sry - Quite funny and irritating that govt expects people to estimate full year taxes magically and pay tax on income that we may never get. Intraday traders like me are very heavily taxed already for small income. Include stt, and tax rate goes above 50% … In contrast, some one can increase net worth in billions through capital gains and not pay a penny until they sell …

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I want to take above example.

JUNE 15th : 50L
SEP 15th : 2 CR
DEC 15th : 5 CR
MARCH 31st : 8 CR

tax liability would be around 3.36 cr.

so the first installment would be 3.36 x 15% = 50.4 lacs and if I have paid only 2,04,750 INR as per above example. does income tax department would charge interest rate for that period?

@Quicko @San78

Hi, yes you shall be charged an interest on the amounts because intraday trading will be considered as a business income and you need to pay advance tax considering the income of the entire year.
However, if it is your first year of business then you won’t be charged any interest if you pay as per the earned income.

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do we have to pay this interest at time of filing ITR?

Yes. The applicable interest would be added to your tax dues when you file the Income Tax Return. You will have to pay the total tax dues including interest amount in form of Self Assessment Tax before you file the Income Tax Return.

last installment of advance tax which is paid on or before 15th March.

do we have to select advance tax or assessment tax while paying 4th installment.

and interest on shortfall of advance tax is paid with 4th installment or assessment tax.

last date is over. Now whatever you are paying you should pay it in the name of Self Assessment Tax.

I m talking about this financial year.

I’m not able to understand. I replied to your question. When the time of advance tax is finished whatever tax you pay in any form is called as Self Assessment Tax (Simply its Tax Paid other than advance Tax)

He is taking about FY23 from what I understand. In that case it wont be 4th installment. It will be the first one for this year.

Thats what I don’t understand. Why he is asking about 4th installment, interest

when you pay tax online you have two option advance tax and self assessment tax. right?

I want to know when we pay tax on 15th march do we have to select advance tax or self assessment tax?

Advance tax

Advance tax is the amount of income tax that is paid much in advance rather than a lump-sum payment at the year-end. Also known as earn tax, advance tax is to be paid in installments as per the due dates decided by the income tax department.
As per section 208 of the Income Tax Act 1961, every person whose estimated tax liability for the year is more than or equal to `10,000 is liable to pay advance tax.
Advance tax varies with the due dates.The due dates are as follows-
•On or before 15th June – 15% of the annaual tax liability
•On or before 15th September – 45% of the annual tax liability
•On or before 15th December – 75% of annual tax liability
•On or before 15th March – 100% of annual tax liability

If you miss the dates for payment of advance tax you will be levied interest under section 234B and 234C of the Income tax Act.

Tax paid during the financial year is called Advance Tax while tax paid after end of financial year but before filing of the Income Tax Return is called Self Assessment Tax. Thus, if you’re paying the last installment during the financial year, you must select Advance Tax.

If the advance tax paid is less than 90% of the actual tax liability, the interest on shortfall of advance tax is to paid under Section 234B as self assessment tax.

You can read more about it here - Section 234B of Income Tax Act : Interest for Non-Payment of Advance Tax

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