Advance tax is an important concept for taxpayers in India. It refers to the system of paying your income tax liability for the current financial year in advance, rather than paying it all at once after the year ends. This helps the government maintain a steady flow of revenue and allows taxpayers to spread their tax payments throughout the year, making it easier to manage finances.
Who Needs to Pay Advance Tax?
Advance tax is primarily applicable to individuals who have income sources other than salary. This includes freelancers, business owners, and those earning income from capital gains, interest, or rent. If your total tax liability exceeds ₹10,000 in a financial year, you are required to pay advance tax.
For salaried employees, advance tax is usually not necessary as their employers deduct TDS (Tax Deducted at Source) from their salary. However, if you have additional income, such as interest, rental income, or capital gains, you may need to pay advance tax.
Exemptions from Advance Tax
Certain individuals are exempt from paying advance tax:
- Senior citizens aged 60 years or above who do not have income from business or profession.
- If the TDS already deducted is more than your total tax liability, you are not required to pay advance tax.
- Taxpayers under presumptive taxation schemes (under sections 44AD or 44ADA) are only required to pay the entire advance tax in one instalment by March 15th.
Advance Tax Payment Schedule
Advance tax payments are made in instalments throughout the year on specific due dates:
- By June 15th – Pay at least 15% of your estimated total tax liability.
- By September 15th – Pay up to 45% of the total tax liability.
- By December 15th – Pay up to 75% of the total tax liability.
- By March 15th – Pay the remaining 100% of the total tax liability.
How to Pay Advance Tax
To pay your advance tax, log in to your income tax account on the e-filing portal. Then, go to ‘e-file’, select ‘e-pay tax’, choose ‘Income Tax’, select the assessment year, and enter the amount you need to pay as ‘Advance Tax.’ You can make the payment using options like net banking or credit/debit cards.
E-filing portal link: www.incometax.gov.in
How to Calculate Your Advance Tax
To calculate your advance tax, estimate your income for the year and compute your tax based on applicable rates. Don’t forget to account for any TDS already deducted from your income. The remaining tax liability after subtracting the TDS is the amount you need to pay as advance tax.
If your income estimates change during the year, you can adjust the amount of your next instalment without filing a revised estimate.
Benefits of Paying Advance Tax
Paying advance tax offers several benefits:
- It prevents the last-minute rush to pay a large sum of taxes at the end of the financial year, making it easier to manage your finances.
- It helps you avoid penalties and interest charges for late payments.
- It ensures the government has a steady flow of funds for public services and infrastructure.
By paying your taxes in advance, you can avoid stress and stay on top of your financial planning.
After the Financial Year: What Happens Next?
After the financial year ends, calculate your total tax based on your actual income. Adjust any advance tax paid against the total tax due. If you’ve overpaid, you can claim a refund by filing your tax returns. The government may also pay interest on the excess amount.
Important Points to Remember
- Any advance tax paid on or before March 31st is considered paid in the current financial year.
- If a due date falls on a bank holiday, you can make the payment on the next working day without penalties.
- Advance tax can be paid from any bank account, even if it’s not in your name, as long as the PAN number of the taxpayer is correctly entered.
Conclusion
Paying advance tax helps you stay on top of your tax obligations, avoid penalties, and ensure a smoother financial year. With proper planning and timely payments, the process of paying taxes can become stress-free.
Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.
If you need assistance or have any questions about advance tax, feel free to reach out to us at info@nricaservices.com or ushma@nricaservices.com or call/WhatsApp us at +91 9910075924. Thank you for reading, and we hope this guide helps you navigate your tax responsibilities effectively.
