CHAPTER-5

ADVANCED PAYMENT OF TAXES

 SECTION OVERVIEW

■  An assessee, both old and new, may require paying advance tax.
■  Advance taxes are paid on income excluding income from agriculture and capital
gain.
■  The assessee shall get the credit for advance tax.
■  If the amount of advance tax paid along with TDS is less than 75% of due tax,
assessee is required to pay simple interest @10% on such deficit.
■  Government will also pay simple interest @10% if advance tax for any reason
exceeds due tax.
■  If the assessee fails to pay advance tax, he will be the assessee in default.
 REQUIREMENT TO PAY ADVANCE PAYMENT
OF TAX: SEC 64

■ (1) Except as provided in section 64(2), tax shall be payable by an

assessee during each financial year by way of advance payment of tax,
hereinafter referred to as ‘advance tax’, in accordance with the provisions
hereafter made in this Chapter, if the total income of the assessee for the
latest income year in respect of which he has been assessed by way of
regular assessment, or has been provisionally assessed under the
Ordinance, or the Income tax Act 1922 exceeds Tk 4,00,000.
■ (2) Nothing in section 64(1) shall apply to any income classifiable under
the heads ‘Agricultural income’ and ‘Capital gains’.
COMPUTATION OF ADVANCE TAX: SEC 65

■ The amount of advance tax payable by an assessee in a financial year

shall be the amount equal to the tax payable on his total income of the
latest income year as assessed on regular basis or provisionally, as the
case may be, as reduced by the amount of tax required to be deducted or
collected at source in accordance with the preceding provisions of this
Chapter.
■ The tax payable under section 65(1) shall be calculated at the rates in
force in respect of the financial year referred therein.
INSTALLMENTS OF ADVANCE TAX: SEC 66

■ Advance tax shall be payable in four equal installments on the fifteenth day
of September, December, March and June of the financial year for which the
tax is payable.
■ However, if before the fifteenth day of May of the year, an assessment of the
assessee is completed in respect of an income year, later than that on the
basis of which the tax was computed under section 65, the assessee shall pay
in one installment on the specified date or in equal installments on the
specified dates, if more than one falling after the date of the said assessment,
the tax computed on the revised basis as reduced by the amount, if any, paid
in accordance with the original computation.
 ESTIMATE OF ADVANCE TAX: SEC 67

■ Where, an assessee who is required to pay advance tax under section 64

estimates, at any time before the last installment is due, that the tax
payable by him for the relevant assessment year is likely to be less than
the amount of tax as computed under section 65, he may, after giving to
the Deputy Commissioner of Taxes an estimate of the tax payable by
him, pay such estimated amount of advance tax, as reduced by the
amount, if any, already paid, in equal installments on the due dates of
payment under section 66.
■ The assessee may furnish a revised estimate of such amount at any time
before any time before any of such installments become payable and may
thereby adjust any excess or deficiency, by reference to the amount
already paid by him under this section, in any subsequent installment or
installments payable in such financial year.
 ADVANCE PAYMENT OF TAX BY NEW
ASSESSEES: SEC 68

■ Any person who has not previously been assessed by way of regular
assessment under the Ordinance or the Income Tax Act, 1922, shall before the
fifteenth day of June in each financial year, if his total income, subject to
section 64 (2), of the period which would be the income year for the
immediately following assessment year is likely to exceed Tk. 4,00,000, send
to the Deputy Commissioner of Taxes an estimate of his total income and
advance tax payable by him calculated in the manner laid down in section 65
and shall pay such amount on such dates specified in section 66 as have not
expired by installments which may be revised according to section 67(2).
 FAILURE TO PAY INSTALLMENTS OF
ADVANCE TAX: SEC 69

■ Where, an assessee who is required to pay advance tax

fails to pay any installment of such tax, as originally
computed or, as the case may be, estimated, on the due
date, he shall be deemed to be an assessee in default in
respect of such installment.
 LEVY OF INTEREST FOR FAILURE TO PAY
ADVANCE TAX: SEC 70

■ Where, in respect of an assessee who is required to pay

advance tax, it is found in the course of regular assessment that
advance tax has not been paid in accordance with the
provisions of this Chapter, there shall be added, without
prejudice to the consequences of the assessee being in default
under section 69, to the tax as determined on the basis of such
assessment, simple interest thereon calculated at the rate and
for the period specified in section 73.
CREDIT OF ADVANCE TAX: SEC 71

■ Any sum, other than a penalty or interest, paid by or recovered

from an assessee as advance tax, shall be treated as a payment
of tax in respect of the income of the period which would be
the income year for an assessment for the year next following
the year in which it was payable and shall be given credit for in
the assessment of tax payable by the assessee.
 INTEREST PAYABLE BY GOVERNMENT ON
EXCESS PAYMENT OF ADVANCE TAX: SEC 72

■ The Government shall pay simple interest at 10% per annum on the
amount by which the aggregate sum of advance tax paid during a
financial year exceeds the amount of tax payable by him as determined
on regular assessment.
■ The period for which interest under section 72(1) shall be first day of July
of the year of assessment to the date of regular assessment in respect of
the income of that year or a period of two years from the said first day of
July, whichever is shorter.
 Illustration:

■ Mr. Robi calculated advance tax for the income year 2010-11 as per the latest assessed
income of taka 1,000,000. Regular assessment for the assessment year 2011-12 was
completed on June 30, 2012 and profit assessed amounts to taka 800,000. Applicable tax rate
is 40%. Calculate interest payable by the government on excess amount.
■ Calculation of excess advance tax paid:
Amount of advance tax paid on the basis of latest assessed income Tk. 400,000
(40% of taka 1,000,000)
Advance tax as per regular assessment (40% of taka 800,000) Tk. 320,000
Excess of advance tax paid Tk. 80,000
Interest payable by the government: (10% on taka 80,000) Tk. 8,000
■ Note: Interest will be paid for a period from 1st July 2011 (first day of assessment year) to
June 30 2012 (day of regular assessment) or for a maximum of 2 years, whichever is shorter.
 INTEREST PAYABLE BY THE ASSESSEE ON
DEFICIENCY IN PAYMENT OF ADVANCE TAX:
■ (1) Where, in any financial year,SEC 73 has paid advance tax on the basic
an assessee
of his own estimate and the advance tax so paid together with the tax deducted
at source, if any , under this Chapter is less than seventy-five per cent, of the
amount of tax payable by him as determined on regular assessment, the assessee
shall pay, in addition to the balance of tax payable by him, simple interest at
10% per amount on the amount by which the tax so paid and deduction falls
short of 75% of the assessed tax.
■ (2) The period for which interest under section 73(1) shall be payable shall be
the period from the first day of July of the year in which the advance tax was
paid to the date of regular assessment in respect of the income of that year or a
period of two years from the said first day of July whichever is shorter.
■ (3) Notwithstanding anything contained in sections 73(1) and (2) -
– (i). where tax is paid under section 74, or
– (ii). provisional assessment has been made under section 81 but regular
assessment has not been made, the simple interest shall be calculated in
accordance with the following provisions-
■ (a). up to the date on which tax under-section 74 or provisionally assessed, was paid;
■ (b) thereafter, such simple interest shall be calculated on the amount by which the tax
so paid falls short of the said assessed tax.
■ (4) Where, as a result of appeal, revision or reference,
the amount on which interest was payable under
section 73(1) has been reduced, the amount of interest
payable shall be reduced accordingly and the excess
interest paid, if any, shall be refunded together with the
amount of tax that is refundable.
 ILLUSTRATION

■ For the assessment year 2019-20, a certain assessee has latest

assessed income of taka 1,000,000. But, he wants to pay
advance tax for the year on the basis of his own estimates that
amounts to taka 800,000. Regular tax rate is 40%. During the
year, tax deducted at source was taka 50,000. Regular
assessment for the assessment year 2011-12 was completed on
February 28, 2012 resulting taka 1,200,000 profit including
profit of taka 80,000 from capital gain and taka 220,000 from
agricultural income. Calculate the amount of excess or shortfall
and explain the consequences for the same.
■ Income eligible to apply advance tax as per regular assessment is taka 900,000 (taka
1,200,000 – taka 80,000 – taka 220,000), excluding capital gain and agricultural income.
Tax liability as per regular assessment (40% of taka 900,000) Tk. 360,000
Tax paid in the form of Tax deducted at sources Tk. 50,000
Advance tax (40% of taka 800,000 – taka 50,000) Tk. 270,000 Tk. 320,000
Shortfall/Deficit Tk. 40,000
75% test: The deficit or shortfall is required to be tested for charging interest.
75% of tax liability as per regular assessment (75% of taka 360,000) Tk. 270,000
Tax paid actually Tk. 320,000
Shortfall/Deficit nil
■ Consequence: In this case, the assessee is required to pay the shortfall of taka (3,60,000-
3,20,000)= taka 40,000.
■ There is no question of interest resulting from 75% test.
 PAYMENT OF TAX ON THE BASIS OF RETURN
[SEE 74]

■ Every person who is required to file a return u/s 75, 77, 78,
89(2), 91(3), or 93(1) shall pay the amount of tax payable on
the basis of such return as reduced by the amount of any tax
deducted from his income u/s 48 and 64 on or before the return
filed.
■ A person who without reasonable cause fails to pay tax as
required under this section, shall be deemed to be an assessee
in default.
Worked Example 1

■ Mr. Alim Seikh has the following records of assessment for various years:
Income years Date of Assessment Total assessed income
2014-2015 21st February, 2016 Taka 6,00,000
2015-2016 10th March, 2017 Taka 15,00,000
2016-2017 30th May, 2018 Taka 12,00,000
2017-2018 15th February, 2019 Taka 12,50,000
2018-2019 Not yet assessed N/A

■ Mr. Seikh, due to the changes of nature of income, wants to pay advance tax on the basis of his
own estimate in lieu of latest assessed income. According to his own estimate, total taxable
income amounts to taka 1,200,000 including taka 100,000 from capital gain and taka 200,000
from agricultural income.
■ Assessment for the income year 2018-2019 has been
completed on 28th February 2020 and his actual income
amounts to taka 1,800,000 excluding capital gain and
agricultural income.
■ For the income year 2018-19, his tax deducted at source was
taka 100,000 and he has paid further tax of taka 150,000 on
31st December 2019 U/s – 74. Applicable tax rate for Mr. Seikh
is 40%. Explain tax implications.
Solution 1:
■ Latest assessed income in this case would be taka 1,500,000 (IY 2007-08) if advance tax was based on
that. But, Mr. Seikh paid advance tax on the basis of his own estimate. So, let us first compute the amount
of advance tax paid.
■ Estimated income of Mr. Seikh excluding capital gain and agricultural income Tk. 900,000
■ Amount of advance tax payable (40% of taka 900,000) Tk. 360,000
■ Advance Income Tax to be paid per installment (taka 360,000/4) Tk. 90,000
■ Advance tax paid by Mr. Seikh on the date of assessment Tk. 180,000
■ (Because only two installments are made on 15th September and 15th December respectively)
■ Let us calculate the amount of shortfall/deficit:
Tax liability as per regular assessment (40% of taka 1,800,000) Tk. 720,000
Tax paid in the form of
Tax deducted at sources Tk. 100,000
Advance tax paid (as calculated above) Tk. 180,000 Tk. 280,000
■ Shortfall/Deficit Tk. 440,000
■ Less: tax paid U/s – 74 Tk. 150,000
■ Remaining Liability Tk. 290,000
■ So, Mr. Seikh would be required to pay taka 290,000 as additional tax. Now let us use 75% test to
decide whether he would be charged interest on the shortfall or not.
75% of tax liability as per regular assessment (75% of taka 720,000) Tk. 540,000
Tax paid actually Tk. 280,000
Revised Shortfall/Deficit Tk. 260,000
Less: tax paid U/s – 74 Tk. 150,000
Remaining liability Tk. 110,000
■ So, Mr. Seikh would be charged interest as per the 75% test for the following time period:
■ On taka 110,000; interest will be charged @ 10% for a period from 1st January 2012 to 28th
February 2012 whereas on taka 150,000; interest will be charged at the same rate but for a period
from 1st April 2011 to 31st December 2011. So, total interest payable by Mr. Seikh would be taka
13,083.33 [(110000×10%×2/12) + (150000×10%×9/12)]. Thus, total amount due by Mr. Seikh to
the government amounts to taka 3,03,083.33 (290,000 +13,083.33).
 END
OF
CHAPTER-05