The Central Board of Direct Taxes (CBDT) has come up with a new rule for taxpayers to self-report their estimates of current income and advance tax liability. Under the existing system, taxpayers pay advance taxes to the income tax (IT) department for a financial year but they are not required to provide income estimates to the CBDT.
For the first half of the financial year ending September 30, companies and individual taxpayers who are required to be audited under the Income Tax Act of 1961 must provide their income estimates before November 15. This is a revenue mobilisation step taken by the CBDT to ensure that tax receipts are not lagging behind in a particular industry.
This rule change also mandates businesses to provide a valid reason for any decline in advance tax payment compared to the previous year. If the income estimates are less than the reported income of the previous year by Rs.5 lakh or 10%, whichever is higher, the taxpayer must submit an additional income estimate statement (for the period ending December 31) before January 31.
According to the CBDT, taxpayers can avoid interest for default or deferment of advance tax when they provide accurate estimates of their income and tax liability. By getting accurate estimates from taxpayers, the IT department can project how much tax revenues can be collected in a particular year. A reliable estimate on tax revenues will help the government plan its expenditure and allocate adequate budget for various welfare schemes.