Advance tax review in a statutory audit tests each quarterly instalment separately against the cumulative percentage of estimated tax liability due by that date, recomputes the estimated total income used for each instalment from the information reasonably available to management at that point in time rather than with year-end hindsight, and checks that interest under sections 234B and 234C has been correctly computed and provided for wherever an instalment fell short, since a year-end total that matches the final tax liability can still conceal instalment-level shortfalls that attract interest.
Instalment-by-instalment testing
- Obtain the advance tax payment schedule showing each instalment's due date, the cumulative percentage of estimated liability required by that date, and the amount actually paid.
- For each instalment, recompute the estimated total income and tax liability using the information management had available at that date — a large one-off item recognized late in the year should not be used to justify an earlier instalment, since that income was not reasonably estimable at that point.
- Check whether the entity revised its income estimate between instalments in response to actual results through the year, which is common and acceptable, versus leaving every instalment at a flat, unchanged percentage of a single initial estimate regardless of how the year was actually trending.
Interest under sections 234B and 234C
| Section | Trigger | What the audit checks |
|---|---|---|
| 234C | Shortfall in a quarterly instalment against the required cumulative percentage | Interest computed instalment-wise at the prescribed rate for the shortfall period, not netted against a later instalment's excess |
| 234B | Advance tax paid for the year is less than 90% of the assessed tax | Interest computed from 1 April following the year, for the full default period, provided for in the tax computation |
Regulatory requirement
The instalment percentages, due dates, and the rates and computation mechanics for interest under sections 234B and 234C are prescribed under the Income Tax Act. Confirm the current figures for the assessment year in question before relying on the client's computation.
How we think about this
Recomputing each instalment's percentage against the due date is arithmetic a tool should do without error, every quarter, for every entity in the group. Judging whether management's estimate at the time of an instalment was reasonable given what was then known is the part that needs an auditor's judgement, not a recalculation.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Audit workflow & automationSA 540: auditing accounting estimates, where judgment replaces a verifiable numberAn estimate can't be vouched to a source document the way an invoice can. SA 540 is about what replaces vouching when there's no single right answer to check against.
- Payroll & employee costTDS on salary: audit testing approachRecomputing TDS for a sample against the declared regime, matching to Form 24Q, and reconciling TDS deducted to deposited and to the payroll register.
- CARO & Companies ActCARO statutory dues clause: testing approachHow to test timely deposit of statutory dues for CARO reporting, handle disputed dues disclosure, and avoid redoing work already done in the GST and payroll sections.
- Audit workflow & automationSA 250: consideration of laws and regulations, and why direct vs. indirect mattersThe auditor is not a compliance officer. SA 250 draws a specific line around what they're actually responsible for noticing.
Free tools, no signup
Each one reads a file entirely in your browser — or, for two of them, just answers a few questions — and nothing is ever uploaded.
- Purchase register checkDuplicate payments, round-sum amounts, weekend-dated invoices, incomplete records.
- GSTR-2B reconcilerMatches your purchase register against GSTR-2B — missing invoices either side, amount mismatches.
- Bank reconciliation checkerMatches your cash book against a bank statement — what's outstanding on each side.
- Fixed asset register checkDuplicate asset codes, missing location or useful life, negative net book value.
- Payroll red-flag scannerBank accounts shared across employees, and records missing an ID, PAN or salary.
- CARO applicability checkerAnswer a few questions about the company and see which CARO 2020 clauses likely apply.
- MSME payment delay checkerMSME-flagged invoices paid — or still unpaid — beyond the 45-day Section 22 limit.
- Related-party transaction screenerTransactions above a threshold you set with no approval reference, grouped by counterparty.
- Depreciation useful life checkerCompares a useful life in use against the Schedule II, Part C indicative figure.
- Materiality calculatorOverall and performance materiality against PBT, revenue, assets or equity, with reasoning shown.
- Sample size calculatorStatistical sample size for a test of controls or a substantive test of detail.