Is there Advance Tax Liability on Sale of Capital Asset?

There is Advance Tax liability if Assessee has sold any Capital Asset (Property/Shares/Units of Mutual Funds/Jewellery/etc.)

As per Section 207 of Income Tax Act,1961 Tax shall be payable in advance during any financial year, in respect of the TOTAL INCOME of the assessee which would be chargeable to tax for the assessment year immediately following that financial year.

EXCEPT:

an individual resident in India, who

1. does not have any income chargeable under the head “Profits and gains of business or profession”; and
2. is of the age of sixty years or more at any time during the previous year.

And only if Advance tax shall be payable during a financial year by Assessee is ₹ 10,000 or more.

Therefore, Advance Tax shall be payable on TOTAL INCOME WHICH INCLUDES SALE OF CAPITAL ASSET* (Property/Shares/Units of Mutual Funds/Jewellery/etc.)

Instalments of Advance Tax and Due Dates:

Advance tax on the current income calculated in the manner laid down in Section 209 shall be payable by

1. all the assessees, other than the assessee who are declaring profits and gains according to provisions of sub-section (1) of Section 44AD or sub-section (1) of Section 44ADA, who are liable to pay the same, in four instalments during each financial year and the due date of each instalment and the amount of such instalment shall be as specified in the Table below:

Due date of instalments

2. an assessee who declares profits and gains in accordance with the provisions of sub-section (1) of Section 44AD or sub-section (1) of Section 44ADA, as the case may be, to the extent of the whole amount of such advance tax during each financial year on or before the 15th March

Provided that any amount paid by way of advance tax on or before the 31st day of March shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of this Act.

*What is Capital Asset as per Income Tax Act?

As per Sub-Section 14 of Section 2 of Income Tax Act, 1961 Capital Asset include:

a) Any kind of property held by an assessee, whether or not connected with the business or profession of the assessee.
b) Any securities held by a Financial Institutional Investor which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.

But Exclude the Following:

1. Stock-in-trade, consumable stores, raw materials held for the purpose of business or profession;
   
2. Movable property held for the personal use of the taxpayer or for any member of his family dependent upon him. However, jewellery, costly stones, and ornaments made of silver, gold, platinum or any other precious metal, archaeological collections, drawings, paintings, sculptures or any work of art shall be considered as a capital asset even if used for personal purposes;
   
3. Specified Gold Bonds and Special Bearer Bonds;
   
4. Agricultural Land in India, not being a land situated:
   
   a. Within the jurisdiction of the municipality, notified area committee, town area committee, cantonment board and which has a population not less than 10,000;
   
   b. Within the range of the following distance measured aerially from the local limits of any municipality or cantonment board:
   
   i. not being more than 2 KMs, if the population of such area is more than 10,000 but not exceeding 1 lakh;
   
   ii. not being more than 6 KMs, if the population of such area is more than 1 lakh but not exceeding 10 lakhs; or
   
   iii. not being more than 8 KMs, if the population of such area is more than 10 lakhs.
   
5. Deposit certificates issued under the Gold Monetisation Scheme, 2015
   

Therefore, if all of the above conditions are satisfied then, there is Advance Tax liability under Income Tax Act, 1961.

Calculate Advance Tax liability and pay it in instalments as specified above.

Consult us for computation of your Advance Tax liability on the Sale of Capital Asset and File your Return of Income to avoid Interest on Advance Tax.