By the name, it can be easily deduced that Advance tax means the tax paid in advance. Advance tax is the tax paid by an assessee in the Previous Year itself based on his estimated income. We know that Income tax liability is known in the Assessment Year based on the income of the Previous Year. But,Read more
By the name, it can be easily deduced that Advance tax means the tax paid in advance.
Advance tax is the tax paid by an assessee in the Previous Year itself based on his estimated income.
We know that Income tax liability is known in the Assessment Year based on the income of the Previous Year. But, the government encourages the taxpayers to pay the tax in the Previous Year itself based on the estimated income.
As per section 208 of the Income Tax 1961, if the total income liability on the estimated income comes up more than Rs. 10,000, then advance tax has to be paid.
The advance tax has to be paid according to the following schedule for the individual and corporate assessees [Other than the assessee who computing profits on a presumptive basis under section 44AD(1) and 44ADA(1)]:
| Due date of Instalment | Amount Payable |
| On or before 15th June | No less than 15% advance tax liability. |
| On or before 15th September | No less than 45% of tax liability, as reduced by any amount if any paid in the earlier instalment. |
| On or before 15th December | No less than 75% of tax liability, as reduced by any amount or amounts if any paid in the earlier instalments. |
| On or before 15th March | No less than 100% of tax liability, as reduced by any amount or amounts if any paid in the earlier instalments. |
Any amount paid by the way of advance tax on or before 15th March shall be treated as advance tax paid during each financial year on or before 15th March.
Also as per section 219, the tax credit is given for the advance tax paid in the regular assessment of income tax.
In case of non-payment or short payment of the advance tax, interest is payable as per section 234B. Interest is also attracted in case of delayed payment of advance tax as per section 234C.
That’s all, I would conclude my answer hoping that it was helpful in making the concept of advance tax easy to grasp.
See less
Before answering your question directly, let’s first understand the two terms, ‘Rent Outstanding’ and ‘Accounting Equation’. Accounting Equation Accounting Equation depicts the relationship between the following items of a business: Assets, Liabilities and Owner’s Equity ( Capital ) It is a simple fRead more
Before answering your question directly, let’s first understand the two terms, ‘Rent Outstanding’ and ‘Accounting Equation’.
Accounting Equation
Accounting Equation depicts the relationship between the following items of a business:
It is a simple formula that implies that the total assets of a business are always equal to the sum of its liabilities and Owner’s Equity (Capital).
ASSETS = LIABILITIES + CAPITAL OR A = L + E
It is also known as the balance sheet equation.
This equation always holds good due to the double-entry system of accounting i.e. every event has a dual effect on items of the balance sheet.
Outstanding Rent
We know rent is an expense for a business and rent outstanding means that rent is due, not paid which implies it is a liability which the business has to settle.
Hence Rent Outstanding is subtracted from the capital balance and added to liabilities.
Let’s take an example to see how rent outstanding affects the accounting equation. Suppose a business has the following figures:
Assets – Rs: 3,00,000
Capital – Rs: 2,00,000
Liabilities – Rs: 1,00,000
Assets = Liabilities + Capital
3,00,000 = 1,00,000 + 2,00,000
Now if Rent outstanding of Rs: 20,000 arises, this will happen:-
Assets – Rs: 3,00,000
Capital – Rs: 2,00,000 – Rs: 20,000 = Rs: 2,80,000
Liabilities – Rs: 1,00,000 + Rs: 20,000 = Rs: 1,20,000
Assets = Liabilities + Capital
3,00,000 = 1,20,000 + 2,80,000.
Hence, when rent outstanding arises, it increases the liability and decreases the Capital by the same amount. Therefore both the sides tally and the accounting equations holds good.
Rent Outstanding is shown on the liabilities side of the balance sheet. Also, the rent outstanding of the current year is shown in the debit side profit and loss account and we know the balance of the P/L account if profit, is added to Capital and in case of loss it is subtracted from Capital. Hence, the rent outstanding is subtracted from the capital.
I hope my answer was useful to you.
See less