Monday, August 22, 2016

Person not liable to pay advance tax

As discussed above, every person whose estimated tax liability for the year is Rs. 10,000 or more is liable to pay advance tax.

However, a resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.

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Mr. Kumar is running a provision store. The turnover of the store for the financial year 2016-17 amounted to Rs. 84,00,000. He wants to declare income under section 44AD at 8% of the turnover. He does not have any other source of income. Will he be liable to pay advance tax?

Mr. Kumar satisfies the criteria of section 44AD in respect of provision store business and, hence, he can adopt the provisions of section 44AD and declare income at 8% of the turnover.

A taxpayer opting for the presumptive taxation scheme of section 44AD is also liable to pay advance tax in respect of business covered under section 44AD. Thus, if Mr. Kumar adopts the provisions of section 44AD, he is also liable to pay advance tax in respect of income generated from provision store business.

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Mr. Vipul (age 39 years) is running a medical store. The turnover of the store for the financial year 2016-17 amounted to Rs. 40,00,000. His accounts revealed a net profit of Rs. 2,84,000. Will he be liable to pay advance tax?

In this case, Mr. Vipul will be liable to pay advance tax in respect of income generated from medical store business if his estimated tax liability for the financial year comes out Rs. 10,000 or more. The taxable income of Mr. Vipul is Rs. 2,84,000. Tax on Rs. 2,84,000 will be Rs. NIL, hence, Mr. Vipul is not liable to pay advance tax.

(*) The normal tax rates for the financial year 2016-17 applicable to an individual below the age of 60 years are as follows:
Nil upto income of Rs. 2,50,000
10% for income above Rs. 2,50,000 but upto Rs. 5,00,000
20% for income above Rs. 5,00,000 but upto Rs. 10,00,000
30% for income above Rs. 10,00,000.

However in case of taxpayer, being an Individual resident in India, rebate under section 87A of Rs. 5,000 or 100% of tax, whichever is lower, would be provided if his total income does not exceed Rs. 5,00,000.

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