[Section 219]: Credit for Advance Tax

Section 219 of the Income Tax Act, 1961 governs how advance tax payments are credited against a taxpayer’s final tax liability. Here’s a detailed analysis:

1. Basic Principle

• All advance tax paymentsmade during the financial year are fully credited to the taxpayer’s account
• Credit is given in the assessment year(AY) corresponding to the financial year (FY) of payment
• Applies to both voluntary paymentsand those made under AO’s order

2. Key Features

✔ Automatic Adjustment

• • Advance tax is automatically adjusted against:
    • Final tax liability
    • Interest/penalty charges
    • Any other outstanding demand

✔ Order of Adjustment

1. 1. First applied against regular tax liability
   2. Then against interest/penalty(if any)
   3. Any excess results in refund

✔ No Separate Claim Needed

• • Credit is given by CPC while processing ITR
  • Appears in Form 26AS

3. Special Scenarios

1. Revised Return Filings

• • Advance tax remains credited even if return is revised
  • Adjustment happens against revised liability

1. Multiple Assessment Years

• • Strictly credited to the AY corresponding to payment FY
  • Cannot be shifted to other years

1. Cases with No Return Filed

• • Credit still given if records show payment
  • May require verification

4. Excess Payment Treatment

If advance tax paid > final liability:

1. 1. Refund Process
      • Automatically initiated
      • Interest u/s 244A may apply (if refund > 10% of tax liability)
   2. Adjustment Options
      • Can be adjusted against other outstanding demands
      • Requires filing Form 30

5. Judicial Interpretations

✔ Mandatory Credit

• • Department cannot deny credit if payment is verified [CIT v. Shelly Products]

✔ No Time Limit

• • Credit must be given even if discovered later [DCIT v. Karnataka Bank]

✔ Interest Implications

• • Excess payment may earn interest u/s 244A from April of AY

6. Practical Example

Mr. X’s FY 2023-24:

• • Advance tax paid: ₹1,50,000
  • Final tax liability: ₹1,20,000
  • Result:
    • ₹1,20,000 adjusted against liability
    • ₹30,000 refunded (with possible interest)

7. Common Issues & Solutions

❌ Payment Not Reflected in 26AS

• • Solution: Submit challan copy to AO

❌ Wrong Assessment Year Credit

• • Solution: File rectification request

❌ Partial Credit Given

• • Solution: Raise grievance via e-filing portal

8. Comparison with TDS Credit