Advance Tax Payment- Due Dates, Calculator, Applicability
What is Advance Tax?
Advance tax, also known as "pay-as-you-earn" tax, refers to paying taxes in advance instead of a lump sum payment at the end of the fiscal year. This is generally applicable to individuals whose tax liability exceeds ₹10,000 in a financial year.
Who Needs to Pay Advance Tax?
• Salaried individuals with other income sources such as rent, interest, capital gains, etc.
• Freelancers and professionals.
• Business owners
• Companies.
When to Pay Advance Tax?
Advance tax payments are made in instalments throughout the year. The due dates and the respective percentage of total tax payable are:
1. 15th June - 15% of the estimated tax liability.
2. 15th September - 45% of the estimated tax liability.
3. 15th December- 75% of the estimated tax liability.
4. 15th March - 100% of the estimated tax liability.
How to Calculate Advance Tax?
1. Estimate Current Income: Calculate the total income expected for the financial year, including salary, interest, rental income, etc.
2. Estimate Deductions: Deduct any eligible deductions under Section 80C to 80U.
3. Compute Tax Liability: Apply the current income tax slab rates to the taxable income.
4. Subtract TDS: Deduct the tax deducted at source (TDS) by employers or others.
5. Determine Advance Tax: If the resultant tax liability exceeds ₹10,000, advance tax must be paid.
How to Pay Advance Tax?
1. Online Payment:
• Visit the official Income Tax Department e-payment portal.
• Select the appropriate challan (Challan 280).
• Fill in the required details, including the correct assessment year, taxpayer type, and payment information.
• Make the payment using net banking or debit card.
• Save the receipt (challan 280) for future reference.
2. Offline Payment:
• Visit a designated bank branch.
• Fill out the physical challan form (Challan 280).
• Pay the tax amount via cash, cheque, or demand draft.
• Collect the stamped copy of the challan as proof of payment.
Interest and Penalties for Non-Payment or Late Payment
• Interest under Section 234B: If the advance tax paid is less than 90% of the assessed tax, interest at 1% per month is charged on the shortfall.
• Interest under Section 234C: Interest is charged for deferment of installment payments if not paid as per the specified schedule. The rate is 1% per month on the amount due.
Filing Advance Tax Returns
• Advance tax payments must be reported while filing the annual income tax return. Ensure all challan receipts are kept safe and details are correctly filled in the return forms to claim the tax credits.
Tips for Efficient Advance Tax Management
• Regular Income Reviews: Periodically review your income and tax liabilities to avoid underpayment.
• Consult Professionals: Seek advice from tax consultants or chartered accountants for accurate calculations.
• Use Software Tools: Utilize online tax calculators and financial planning tools for easier computation.
• Maintain Records: Keep detailed records of all advance tax payments for reference and verification during tax filing.
By understanding and adhering to advance tax requirements, taxpayers can manage their tax liabilities more effectively and avoid penalties and interest charges.
• Advance tax payment is a crucial aspect of tax compliance in India, designed to ensure a steady flow of revenue to the government throughout the year. It applies to individuals, freelancers, professionals, business owners, and corporations with a tax liability exceeding ₹10,000 in a financial year.
• Understanding the rules and schedules for advance tax payment helps taxpayers avoid interest and penalties, facilitates better financial planning, and ensures compliance with the tax regulations. Key steps include:
• Timely and accurate payment of advance tax can help you manage your tax obligations efficiently, avoid year-end stress, and ensure smooth compliance with tax laws. By adhering to these guidelines, taxpayers can contribute to a more streamlined and predictable tax collection process, benefiting both themselves and the economy.
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