Familiarising Investors With The Advance Tax Process

Familiarising Investors With The Advance Tax Process

As India’s leading integrated cash flow solution provider, we at KredX are committed to providing seamless customer service by aligning our process and ensuring compliance with the regulations and policies.

We wanted to familiarise our investors with the advance tax and accrued interest process for FY 2019-2020 to ensure a hassle-free and seamless experience.

As a company, KredX ensures we abide by the tax guidelines laid out by the government and policy-makers. Here is a look at the details of the advance tax and accrued interest process on the KredX platform.

Advance Tax And How To Calculate Accrued Interest:

What Is Advance Tax?

Advance tax, also known as Pay As You Earn Tax, refers to the process of paying income tax in advance instead of paying a lump sum amount at the end of the year. In advance tax, payments are made in instalments as per the due date provided by the IT department.

Deadlines For Payment Of Advance Tax For FY 2019-20*

Deadlines Advance Tax Payable
On or before 15 June 15%
On or before 15 September 45%
On or before 15 December 75%
On or before 15 March 100%

*For both individual and corporate taxpayers 

Who Is It Applicable To?

As per Section 208 of the Income Tax Act, every person whose estimated tax liability for the year is Rs. 10,000 or more shall pay his/her tax in advance, in the form of “advance tax”. However, a resident senior citizen (an individual ageing 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.

How To Pay Advance Tax?

Advance tax can be paid through tax payment challans at any IT department authorised bank branches. It can also be paid online via the Income Tax department website or National Securities Depository.

What Are Accrued Interests?

Accrued Interests is the return that is yet to be paid out to the investors. For instance, if a Fixed Deposit (FD) pays out Rs. 10 interest in a year’s time, then accrued interest at the end of 6 months will be Rs. 10 x (6 months/ 12 months) = Rs. 5.

Why Is Calculating Accrued Interest Important? Is it Applicable To The Earnings From KredX Platform?

If your investments in KredX span across 2 financial years, then it is possible that you have accrued some gains (in the form of interest and additional gains like penalty fee etc.) in the 1st financial year, but are yet to receive the cash in the 2nd financial year.

The income tax on the said accrued gains needs to be paid to the government in the 1st financial year, i.e., the year when the gains are accrued and not when they are actually paid out.

For instance, if an investor purchases a deal on May 1st 2019, with a tenure of 60 days repayment then the deal maturity is on 30th of June and the 1st advance tax date is 15th June. Hence the presumptive interest should be taken into account when calculating advance tax for the quarter (April-June). 

Individual’s Tax Bracket = 30%

Amount invested in KredX = 10000000

Deal Tenure = 60 days

Net yield = 15%

Accrued Interest = 2,51,562.50

Tax on Accrued Interest = 30% * 2,51,562.50 * 1.04(4% edu cess)

What Is My Advance Tax Liability?

For both Individuals and Companies, income from KredX is included in taxable income under the provisions relating to the payment of advance tax (Section 208 of the Income Tax Act). If your total tax liability for the year is more than INR 10,000, then you need to file advance tax on the gains that are expected from investments on KredX’s platform.

Sometimes, the borrower companies cut TDS (Tax Deducted at Source) and pay part of the advance tax to the government on your behalf. Such amounts will be reflected in your statements under the TDS header. You can offset your tax liability by this amount when paying your advance tax.

As always, in case of any queries, patrons can reach out to us at investorconnect@kredx.com.

Also Read: KredX Process 101: Familiarising Investors With The TDS Process For FY 2018-19