by 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:
- 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).
- 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.
- Total Tax Liability:
Total tax liability for the year would be ₹1,12,500 + ₹4,500 = ₹1,17,000.
- 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:
- 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.
- 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.
- 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.
