For easy life of senior citizens - need to liberlize exemption from advance tax payable.

[DEV KUMAR KOTHARI]

For easy life of senior citizens - need to liberlize exemption from advance tax payable.

Request and suggestion for consideration of

the honorable Finance Minister:

Considering  the pupose of exemption, provisions of tax deductions,  and other  ground realities related to senior citizens honorable Finance Minister is requested to amend the provision of S.207  and remove the condition of ‘ no  income from business and profession’  and make all incomes including from business and profession not subject to advance tax in case of senior citizens resident in  India.

Such amendment will provide relief to senior citizens from contingencies and disputes which can arise in case of scrutiny of Return of Income by artificial intelligence and physical scrutiny.

Section 207 reads as follows, with highlights added for analysis:

Income-tax Act, 1961

[Liability for payment of advance tax.

207. [(1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income".

(2) The provisions of sub-section (1) shall not apply to an individual resident in India, who-

(a)  does not have any income chargeable under the head "Profits and gains of business or profession"; and

(b)  is of the age of sixty years or more at any time during the previous year.] ]

Unquote:

Tax is payable in advance  during the FY or preious year in which income is earned or acrued and is taxable for next FY known as assessment year (AY). The requirement is mandatory by use of phrase  Tax shall be payable in advance , as per above provision.

The relaxation is provided for senior citizens who are resident in India. It is not applicable to NRI.

The  relaxation or exemption is not headwise:

The exemption is not headwise that is according to heads of income. An individual who is otherwise eligible to avail exemption will not be eligible to avail exemption if he has any income which is chargeable under the head "Profits and gains of business or profession".

Thus, if there is even a minor income which is chargeable under the head "Profits and gains of business or profession", then exemption shall not apply and advance tax shall be payable on entire income falling under all the heads of income.

Suppose a senior citizen has income from house property, capital gains, and other sources amounting to Rs.15 lakh and no advance tax was payable thereon.

Now suppose at feg end of the previous year he earns some income say Rs. 1 lakh as fees or honorarium, then he  may  be liable to pay advance tax on entire income of Rs.16 lakh.

In case of failure to pay tax in advance ( on 15th June, 15th September, 15 December and 15 March)  he will be liable to pay interest under S.234B and 234C in respect of advance tax payable on entire income of Rs.16 lakh and not only in respect to income of Rs. 1 lakh falling under the head business or profession.

This is not at all justified.

Dispute can also arise as to head of income:

In case  the tax officer disputes that some income should fall under the head business or profession, then  he  will also levy interst for short fall in payment of advance tax and its installments.

There can be claim of income falling under other heads and department can consider it as falling under head business or profession. In past we observed serious disputes  arose in various situations when tax is deducted under different provisions like from rent from properties and machinery, interest , commission, some type of fees etc.

Senior citizens- major source of income :

Except in case of old and big businessman , generally major source of income in case of senior citizens are other than from business and profession. Many of such earnings may not be subject to Tax Deduction at Source (TDS), therefore, if some income is considered as falling under the head business or profession, then the liability to pay advance tax on entire income can be huge, in hands of senior citizen.

Big businessman have organisations to deal with tax matter and they also have special purpose vehicles like firms. LLP and companies for carrying business. Therefore they do not face such problems.

Problems arise for small businessman or professional who have casual or minor income from business or profession earned in personal account.

Special care required:

  Check if there is any TDS for incomes like honorarium,  fees, commission , rent on machinery or furniture even in case of some buildings,  which can fall under head Business and profession but many assessees / tax practioners consider them as income from other sources.

Check even if there is no TDS, If there is any such income then advance tax exemption will not apply and advance tax will have to be paid on income of all nature and from all sources, if Tax Officer consider any income chargeable under the head business or profession.