Advance Tax Payment: Due Dates, Calculator, Applicability, Procedure, Installment Details
Advance Tax

Advance Tax Payment: Due Dates, Calculator, Applicability, Procedure, Installment Details

Who is bound to pay advance tax in India?

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.

Who all needs to pay advance taxes?

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.

What is the mode of payment of advance tax?

Payment can be made through the Net banking facility of Authorized Banks only. At present, there are '22' Authorized Banks that collect income tax. Taxpayers having an account in any Bank other than the Authorized Banks may choose the option of NEFT/RTGS mode or Net Banking under Payment Gateway mode.

Advance payment of tax represents a proactive approach to fulfilling one's tax obligations. By estimating the expected income tax liability for the year, taxpayers—be it individuals, businesses, or professionals—with a tax obligation exceeding INR 10,000, must calculate and disburse their dues in installments. This method contrasts the traditional lump-sum payment at the fiscal year's end and excludes seniors over 60 not earning from business or profession. We understand managing finances can be complex; hence, our guide outlines the intricacies of advance tax payment. From eligibility criteria to due dates, and from calculation methods to payment options, we're here to help streamline your tax return process. Discover insights on avoiding penalties and making savvy decisions to manage capital gains and advance tax payments effectively.

Understanding Advanced Income Tax

Advance tax payment is a fiscal responsibility that ensures taxpayers contribute to government coffers as they earn throughout the year. This system allows for a more balanced and manageable approach to tax payment, avoiding the year-end rush and the financial strain of a lump-sum payment. Here's what you need to know about this pre-emptive tax measure:

Due dates for advance tax payments:

For Corporate Taxpayers:
15% of the advance tax is payable by June 15.
45% of the advance tax is payable by September 15.
75% of the advance tax is payable by December 15.
100% of the advance tax is payable by March 15.

For Non-Corporate Taxpayers (like individuals, professionals, etc.):
30% of the advance tax is payable by September 15.
60% of the advance tax is payable by December 15.
100% of the advance tax is payable by March 15.

1. Mechanics of Advance Tax Payment:

Income Estimation: Advance tax is calculated on your estimated income for the financial year, including salary, interest, capital gains, rental income, and profits from business or freelancing.

Instalment Payments: As opposed to a one-time payment at the end of the fiscal year, advance tax is paid in instalments. The due dates for these payments are stipulated by the income tax department.

Tax Calculation: The amount payable is determined by applying the appropriate income tax slab rates to your estimated taxable income after accounting for deductions and reliefs under section 87A, including surcharge, education cess, and SHEC.

2. Eligibility and Exclusions:

Who Should Pay: If your calculated tax liability for the year equals or exceeds INR 10,000, you're obliged to pay advance tax. This applies after considering TDS from the previous year.

Senior Citizen Provision: Senior citizens above the age of 60, not earning from business or profession, are exempt from making advance tax payments.

Special Circumstances: Income such as capital gains or lottery winnings is subject to advance tax but only becomes applicable after the income is actually received.
Benefits and Compliance:

Easing the Year-End Burden: By distributing tax payments throughout the year, you mitigate last-minute payment stress and the risk of failing to pay taxes on time.

Supporting Government Funding: Timely advance tax payments assist in the smooth functioning of government operations by ensuring a steady inflow of funds.

Payment Method: Taxes are paid using Challan No. ITNS 280 by the prescribed due dates, which can be easily done online for convenience. By understanding the advance payment of tax, you align with the proactive approach of managing your tax liabilities effectively. Remember, staying informed and prepared can make the process of advance tax payment a stress-free part of your financial planning.

Eligibility Criteria for Advance Tax Payment

Eligibility Criteria for Advance Tax Payment Advance tax payment is an integral part of income tax compliance for many taxpayers. Understanding who is obligated and who is exempt can help ensure that you meet your tax responsibilities efficiently. Here are the key eligibility criteria:

Tax Liability Threshold:

Every individual, Hindu Undivided Family (HUF), business, or professional whose estimated tax liability for the year is INR 10,000 or more is required to pay advance tax.
This threshold applies after adjusting for any Tax Deducted at Source (TDS) for the financial year.

Age-Based Exemptions:

Senior citizens aged 60 years or above, who do not have income from a business or profession, are exempt from paying advance tax.
This exemption applies to resident senior citizens, ensuring that they do not have the additional burden of advance tax payment if they are not engaged in business activities.
Income Source Considerations:

Salaried individuals, freelancers, and businesses with a tax liability of INR 10,000 or more must pay advance tax.

Non-resident Indians (NRIs) with an estimated tax liability exceeding INR 10,000 from income accrued in India are also required to make advance tax payments.

Taxpayers under the presumptive tax regime—Section 44AD for businesses and Section 44ADA for professionals—must pay the entire amount of their advance tax in one installment by March 15.

Special Categories:

Corporate entities, partnership firms, Limited Liability Partnerships (LLPs), and non-resident taxpayers are mandated to pay advance tax if their estimated tax liability exceeds the INR 10,000 mark.

Individuals who have opted for the presumptive taxation scheme under sections 44AD or 44ADA are required to pay their entire advance tax amount in one installment on or before March 15.

Exclusions from Advance Tax:

Income that falls below the taxable limit, farmers, and agriculturists are not required to pay advance tax.
Salary income typically does not necessitate advance tax payment as employers deduct TDS.

Dividend income is also not subject to advance tax.

It is important to note that if more advance tax is paid than the actual tax liability at the end of the financial year, taxpayers are eligible for a refund. Staying informed about these criteria can help you navigate the advance tax payment process and avoid any penalties for non-compliance.

Advance Tax Payment: Due Dates, Calculator, Applicability, Procedure, Installment Details
Maniraj Anantham 10 May, 2024
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