TaxTMI 
TaxTMI 
Reforming Advance Tax Obligations : Clause 406 of the Income Tax Bill, 2025 Vs. Section 210 of the Income-tax Act, 1961
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....a cornerstone of revenue administration, and its statutory articulation reflects the balance between taxpayer autonomy and regulatory oversight. This commentary will dissect Clause 406 in detail, analyze its objectives and practical implications, and provide a comparative analysis with the corresponding provisions u/s 210(1) and (2) of the Income-tax Act, 1961, focusing on legislative intent, operational mechanics, and potential areas of divergence or improvement. Objective and Purpose The legislative intent behind Clause 406, as with its predecessor, is threefold: * Ensuring Timely Revenue Collection: By mandating advance payments, the government secures a steady flow of funds throughout the financial year, reducing reliance on year-end collections and mitigating fiscal deficits. * Promoting Self-Assessment and Voluntary Compliance: The provision empowers taxpayers to estimate their own liability, fostering a culture of self-compliance and reducing administrative burden. * Flexibility and Responsiveness: Recognizing the dynamic nature of income, the law allows taxpayers to revise their estimates and adjust payments, thus accommodating genuine fluctuations in income streams....
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....eshold for liability is determined by section 404, necessitating a review of that section for complete clarity. 2. Sub-clause (2): Flexibility to Revise Advance Tax Payments "A person who pays any instalment or instalments of advance tax under sub-section (1), may increase or reduce the amount of advance tax to accord with specified sum and the advance tax payable thereon, and make payment of the said tax in the remaining instalment or instalments, accordingly." Key Features: * Right to Revise: Taxpayers are expressly permitted to revise their advance tax payments, either upwards or downwards, in subsequent instalments to reflect revised estimates of income. * Alignment with Actual Income: The provision ensures that advance tax payments are responsive to actual business or professional realities, reducing the risk of overpayment or underpayment. * Procedural Simplicity: No elaborate procedure is prescribed for revision, thereby minimizing compliance burdens. Interpretation: This sub-clause is a recognition of the inherent unpredictability in income generation, especially for businesses and professionals. By allowing mid-year adjustments, it mitigates the risk of penal con....
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..... Comparative Analysis with Section 210(1) and (2) of the Income-tax Act, 1961 Section 210 of the Income-tax Act, 1961, is the statutory predecessor to Clause 406, and a comparative analysis reveals both continuity and subtle shifts in legislative approach. Section 210(1): Obligation to Pay Advance Tax "Every person who is liable to pay advance tax u/s 208 (whether or not he has been previously assessed by way of regular assessment) shall, of his own accord, pay, on or before each of the due dates specified in section 211, the appropriate percentage, specified in that section, of the advance tax on his current income, calculated in the manner laid down in section 209." Comparison: * Substantive Parity: Both provisions impose a duty on taxpayers to pay advance tax on their own accord, regardless of prior assessment status. * Cross-References: Section 210(1) refers to sections 208 (liability), 211 (due dates), and 209 (calculation), while Clause 406 refers to sections 404, 408, and 405, respectively. The renumbering suggests a reorganization rather than substantive change. * Terminology: The use of "current income" in Section 210(1) is paralleled by "specified sum" (define....
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.... Structural Reorganization: The new Bill appears to reorganize and possibly simplify the advance tax provisions, consolidating taxpayer obligations and rights in a single, concise clause. * Potential Policy Shift: By focusing Clause 406 solely on taxpayer-initiated payments, the Bill may be signaling a greater trust in voluntary compliance and a move away from administrative intervention, at least at the initial stage. Comparative Table Aspect Clause 406 of the Income Tax Bill, 2025 Section 210(1) and (2) of the Income-tax Act, 1961 Applicability Every person liable u/s 404 Every person liable u/s 208 Self-Assessment On his own accord, based on "specified sum" (current income as estimated by assessee) On his own accord, based on "current income" (assessee's estimate) Calculation Reference Section 405 Section 209 Due Dates Section 408 Section 211 Adjustment Provision May increase or reduce advance tax in subsequent instalments to match revised estimate May increase or reduce advance tax in subsequent instalments to match revised estimate Definition of Income Specified sum = current income as estimated by assessee Current income as est....