All taxpayers must pay advance tax even if most of their income comes under TDS.

If the tax payable for the year is Rs 5,000 or more, advance tax is payable in three instalments during each FY as follows:

• On or before September 15: 30 per cent of estimated tax.
• December 15: 60 per cent less tax already paid.
• March 15: 100 per cent less tax already paid.

Time limit for filing returns Under Section 139(1), company and non-corporate taxpayers, which undergo statutory audits must file returns by October 31. In all other cases, the returns must be filed by July 31 unless the person falls in the 1-by-6 category. Such people must file by October 31.

The assessing officer cannot extend the time limit for furnishing a loss return, even if the assessee has reasonable grounds. He cannot admit the benefit of loss incurred during the current year, while assessing income.

Section 234A: An assessee who files late is charged simple interest at the rate of 1.25 per cent per month or part of a month as reduced by the advance tax and TDS. Interest is leviable on the tax on the total income declared in the return and not on the income as assessed and determined by the assessing authority. [Tej Kumari v CIT 22TCR250 (Pat), 2001]

If no return is furnished, interest is chargeable from the due date to the date of best judgement assessment under Section 144.

Section 144 provides that the ITO shall make the assessment to the best of his judgement in any of the following three cases :

• The assessee has not made a voluntary return;
• The assessee has failed to comply with all the terms of a notice to produce accounts or other documents;
• The assessing officer considers the return to be incorrect or incomplete and serves a notice upon the assessee, but the assessee does not comply with the terms of the notice.

Section 234B: Where an assessee fails to pay advance tax or where total advance tax paid is less than 90 per cent of the assessed tax, simple interest at 1.25 per cent for every month or part of a month comprised in the period from the April 1 next to the date of assessment, on the assessed tax or on the amount by which the advance tax paid falls short of the assessed tax.

The number of months shall be calculated from April 1 next following the FY during which the advance tax was payable to the date of final assessment. If the interest has been paid along with self-assessment tax, that will be reduced from the interest chargeable.

In this case, the interest will be charged on the income as assessed by the ITO.

Section 234C: If there are shortfalls in the first two instalments, simple interest at the rate of 1.25 per cent per month is charged for three months (when the next instalment falls due) on the amount of shortfall of 30 per cent or 60 per cent, even if the delay is just by one single day.

If the advance tax paid on or before March 15 is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of 1.25 per cent on the shortfall. This provision doesn't apply to shortfalls because of under-estimates or failures to estimate capital gains or winnings from lotteries, crossword puzzles, races, etc.

Advance tax paid on or before March 31 was treated as advance tax paid during the year and therefore, many assessees used to make payments only towards the last day of the year. In FA94 simple interest at the rate of 1.25 per cent was levied on the shortfall on the returned income.

Unanticipated income and capital gains No interest is charged on unanticipated income received after the date of first or subsequent instalment of advance tax. However, advance tax must be paid on it at the next due date.

Time limit for assessment

Assessing officers used to make prima facie adjustments after examining every return minutely. This has been done away with. Acknowledgment that the return has been filed is deemed an intimation. Where adjustments are necessary the ITO must send an intimation and refund or demand notice one year from the end of the relevant FY.

The amended Section 149(1) provides that a notice for reassessment or recomputation of income can be issued only within four years from the end of the relevant AY. If amounts of more than Rs 100,000 have escaped assessment the period can be six years.

The ITO does not have the power to withhold a refund under any circumstances.

Willful failure to furnish return of income during the prescribed time is dealt with by Section 276CC. Where, the tax evasion exceeds Rs 100,000, the penalty is a fine and imprisonment that could vary from six months and seven years. In other cases, it could be a fine and imprisonment of three months to three years.]

Over and above this, Section 271F imposes a penalty of Rs 1,000 for late furnishing of returns in normal cases and Rs 500 for those under the 1-by-6 criterion.

For refunds, interest is paid at 8 per cent per annum, for every month or part of a month. The period commences from April 1 to the date on which refund is granted. Interest is not paid if the refund is less than 10 per cent of the tax.

Corresponding amendments related with wealth tax returns have been carried out to bring it in line with the income tax provisions.

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