Advance tax is the income tax which is paid by the taxpayer in advance instead of making a lump sum payment at the end of the financial year. It is basically the tax which you pay as you earn.
The taxpayer has to pay the amount in instalments as per the due date given by the income tax department. Another way of advance tax payment is by paying it through Online tax payment website of the Income Tax department or the National Securities Depository.
What is Advance Tax?
Advance tax is the amount of income tax that is paid much in advance rather than a lump-sum payment at the year-end. Also known as earn tax, advance tax is to be paid in installments as per the due dates decided by the income tax department.
Who is Liable to Pay Advance Tax?
- Taxpayers who owe more than Rs. 10,000 in taxes, after adjusting TDS, in a fiscal year are required to pay advance tax.
- This rule applies to all categories of taxpayers, including freelancers, professionals, salaried individuals, and senior citizens.
- Senior citizens who are more than 60 years old and do not own an enterprise are exempt from paying advance tax.
- For taxpayers who choose a presumptive tax regime under Section 44AD for businesses.
- They are supposed to pay the full advance tax liability in a single payment on or before 15 March. Nevertheless, they can also pay their tax liabilities by 31 March.
- Under the presumptive tax regime under Section 44ADA.
- Independent professionals like architects, doctors, lawyers, consultants, etc., have to pay the full advance tax liability in a single payment either on or before 15 March.
- They also have the option to pay the entire amount by 31 March.
Who Should Pay Advance Tax?
Salaried individuals, freelancers and businesses– If your total tax liability is Rs 10,000 or more in a financial year, you have to pay advance tax. The advance tax applies to all taxpayers, salaried individuals, freelancers, and businesses.
Senior citizens– People aged 60 years or more who do not run a business are exempt from paying advance tax. So, only senior citizens (60 years or more) having business income must pay advance tax.
Presumptive income for businesses–The taxpayers who have opted for the presumptive taxation scheme under section 44AD have to pay the whole amount of their advance tax in one instalment on or before 15th March. They also have the option to pay all of their tax dues by 31st March.
Presumptive income for professionals– Independent professionals such as doctors, lawyers, architects, etc. come under the presumptive scheme under section 44ADA. They have to pay the whole of their advance tax liability in one instalment on or before 15th March. They can also pay the entire amount by 31st March.
Advance Tax Due Dates for FY 2023-24
The last date to pay the final instalment of advance tax payment for the Financial year 2023 – 2024 is 15th March, 2024. On this date, 100% of advance tax liability has to be paid by taxpayers.
The following tables provide a comprehensive understanding of the due dates and liability of advance tax for various types of taxpayers.
Tax Advance Payment for Companies
Due Date of Tax Instalments | Amount of Tax Payable |
On or before 15th of June | 15% |
On or before 15th of September | 45% |
On or before 15th of December | 75% |
On or before 15th of March | 100% |
Tax Advance Payment for Business Owners and Self-employed
Due Date of Tax Installment | Amount of Tax Payable |
On or before 15th of September | 30% |
On or before 15th of December | 60% |
On or before 15th of March | 100% |
How to Pay Advance Tax Online ?
Step 1: Visit the official Website of the Income Tax Department
Step 2: Click ‘e-pay Tax’ option under ‘Quick Links‘
Step 3: Now, Enter your ‘PAN‘ and ‘Mobile Number‘. Click on ‘Continue‘
Step 4: Enter the ‘OTP‘ received on your Mobile and Click on ‘Proceed‘
Step 5: Select First Tab i.e ‘Income Tax’ Option and ‘Continue‘
Step 6: You’ll have to fill in details such as the right assessment year, address, phone number, email address, bank name, captcha code and other details.
Step 5: Once you are done filling in the details, you’ll be redirected to the bank’s Net Banking page.
Step 6: Next, you’ll get details of your payment including your challan number.
Step 7: It is important to report your payment after you’ve made the payment.
How to Calculate Advance Tax Payment?
Step 1: Estimate how much income you earned in the financial year for which you are doing the advance tax calculation.
- Income from any interest earned from FDs, savings account, etc.
- Capital gains.
- Professional income.
- Rental income.
- Income of minors if it is added to that of the taxpayer.
- Any other income.
Step 2: Add your salary to the figure above to arrive at the gross taxable income.
Step 3: Calculate the tax payable by applying the latest income tax slab that is applicable to you.
Step 4: As per the TDS slab, deduct the TDS that is likely to get deducted or which has already been deducted.
If your tax liability after deduction of TDS exceeds Rs.10,000, you are liable to pay advance tax.
FAQs
What happens if advance tax paid is more than the total tax liability?
If the advance tax paid is more than the total tax liability, the extra amount will be refunded. If the advance amount is more than 10% of the tax liability, then an interest of 6% p.a. will be paid by the IT Department.
What is the fine for failing to pay advance tax by the due date?
Under sections 234B and 234C of the Income Tax Act, you will be assessed interest if you miss the deadlines for paying advance tax.