Problems on Advance Tax and TDS

17/02/2024 0 By indiafreenotes

Addressing specific problems on Advance Tax and Tax Deducted at Source (TDS) requires a nuanced understanding of their respective regulations and calculations according to the Income Tax Act of India.

Example Problem on Advance Tax:

Scenario:

Mr. A estimates his total income for the financial year 2023-24 to be ₹10,00,000. This includes salary income, interest from fixed deposits, and income from other sources. He wants to calculate his advance tax liability.

Solution:

  1. Calculate Estimated Total Income Tax:
    • First, calculate the total income tax liability based on the current slab rates applicable for the financial year. Assuming Mr. A falls under the general category (not senior citizen) and opts for the old tax regime, his tax liability before cess would be calculated based on the slab rates.
    • For simplicity, let’s assume the tax on ₹10,00,000 comes out to be ₹1,12,500 (this is a hypothetical figure for illustrative purposes, actual calculations should be based on the prevailing tax slab rates).
  2. Add Health and Education Cess:

Health and Education Cess is levied at 4% on the income tax. Thus, cess = 4% of ₹1,12,500 = ₹4,500.

  1. Total Tax Liability:

Total tax liability for the year would be ₹1,12,500 + ₹4,500 = ₹1,17,000.

  1. Calculate Advance Tax:

Advance tax is to be paid in installments if the tax liability exceeds ₹10,000 in a financial year. The payments are due as follows:

  • 15% by 15th June,
  • 45% by 15th September,
  • 75% by 15th December,
  • 100% by 15th March.

Therefore, by the 15th June, Mr. A should have paid 15% of ₹1,17,000 = ₹17,550 as advance tax.

Note:

This is a simplified example. Actual calculations would need to account for deductions, exemptions, and other sources of income in detail.

Example Problem on TDS:

Scenario:

Mrs. B receives a monthly rent of ₹50,000 for a property she owns. The tenant is required to deduct TDS on the rent paid to Mrs. B.

Solution:

  1. Determine TDS Applicability:
    • TDS on rent is applicable if the total rent payment exceeds ₹2,40,000 in a financial year.
    • Since Mrs. B’s annual rent income is ₹6,00,000 (₹50,000 x 12), TDS is applicable.
  2. Calculate TDS Amount:
    • The TDS rate on rent, assuming the tenant is an individual or HUF and the property is not being used for business or profession, is 5% for rent exceeding ₹2,40,000.
    • TDS per month would be 5% of ₹50,000 = ₹2,500.
  3. Tenant’s Responsibility:
    • The tenant should deduct ₹2,500 every month before paying the rent to Mrs. B.
    • The tenant is also responsible for depositing this TDS with the government on Mrs. B’s behalf and providing her with a TDS certificate.