BAJAJ BROKING
July 25, 2024
6 mins read
If your total tax liability exceeds ₹10,000 in a financial year (after TDS deductions), you are required to pay advance tax. You do not need to wait until the end of the financial year to clear your dues. Instead, you pay it in instalments across the year. This applies to salaried individuals with additional income, freelancers, business owners, and corporate taxpayers. Advance tax helps the government receive a steady income flow and ensures that you manage your own taxes in time, instead of accumulating a large liability at year-end.
You can calculate your advance tax by estimating your total income, deducting applicable exemptions and deductions, and applying the income tax slab rates. Then subtract TDS and any relief or rebates to arrive at your advance tax amount. You need to pay this amount in instalments as per due dates fixed by the Income Tax Department.
Advance tax, often termed as the "pay-as-you-earn" tax, is the income tax paid in advance during the financial year in which the income is earned. Instead of waiting until the end of the fiscal year to settle tax dues, taxpayers make periodic payments based on their estimated income. This approach aligns tax payments with income generation, facilitating smoother financial planning for both the government and taxpayers.
Advance tax payment involves the process of remitting portions of one's anticipated tax liability at specified intervals within the financial year. These payments are made based on estimated income, and any discrepancies between estimated and actual income can be adjusted in subsequent installments or during the final tax filing.
Advance tax is applicable to various categories of taxpayers:
Note: Senior citizens aged 60 years or above, who do not have income from business or profession, are exempt from paying advance tax.
Whether you are salaried with additional income or running a company, you need to pay advance tax in four instalments. The government has specified clear due dates for each quarter. Paying on time avoids interest under sections 234B and 234C of the Income Tax Act. You should stay aware of these timelines and plan accordingly. This ensures smooth compliance with tax laws and saves you from penalties due to delay or underpayment.
Due date | Advance tax payable |
On or before 15 June | At least 15% of total estimated tax liability |
On or before 15 September | At least 45% of total estimated tax liability (cumulative) |
On or before 15 December | At least 75% of total estimated tax liability (cumulative) |
On or before 15 March | 100% of total estimated tax liability (cumulative) |
If you have opted for the presumptive taxation scheme under Section 44AD or Section 44ADA, your advance tax liability works differently. You only need to pay advance tax once during the year. This makes the process simpler if you are a small business owner or a professional opting for presumptive income. However, you still need to follow the due date set for this category.
Make sure you calculate your estimated tax liability as per the presumptive income rules and pay it by the stipulated date to avoid interest and penalties. The table below shows the due date.
Due date | Advance tax payable |
On or before 15 March | 100% of total tax liability under presumptive scheme |
You may be a professional or business owner opting into the presumptive taxation scheme voluntarily. In that case, you are still required to make the full tax payment in advance, but only once during the year. Unlike the four-quarter structure for other taxpayers, this one-time payment must be done by 15 March of the financial year.
It is important for you to be aware of this simplified structure, especially if you plan your taxes in one go. Paying the entire advance tax by this deadline helps you avoid interest and ensures you remain compliant with the Income Tax Department’s rules.
Due date | Advance tax payable |
On or before 15 March | 100% of total tax liability under presumptive taxation |
To calculate advance tax:
Scenario: Mr. Sharma, a freelancer, estimates his taxable income for the financial year to be ₹12,00,000. He anticipates deductions under Section 80C amounting to ₹1,50,000.
Calculation:
Up to ₹2,50,000: Nil
₹2,50,001 to ₹5,00,000: 5% of ₹2,50,000 = ₹12,500
₹5,00,001 to ₹10,00,000: 20% of ₹5,00,000 = ₹1,00,000
Above ₹10,00,000: 30% of ₹50,000 = ₹15,000
Total Tax: ₹12,500 + ₹1,00,000 + ₹15,000 = ₹1,27,500
15th June (15%): ₹19,890
15th September (45%): ₹59,670
15th December (75%): ₹99,450
15th March (100%): ₹1,32,600
Note: Any TDS deducted can be adjusted against these amounts.
You can pay your advance tax online using the official e-Payment facility on the Income Tax Department’s website. The process is straightforward, and it ensures quick payment without visiting any tax office. You can do it using your savings account, debit card, or net banking. The steps below explain how you can pay your advance tax in a few minutes from wherever you are.
These steps guide you through the online process so that you do not miss any deadlines. Be sure to keep a copy of the challan and payment confirmation for your records.
The following individuals are exempt from paying advance tax:
Late payment of advance tax attracts interest under Sections 234B and 234C of the Income Tax Act.
Section | Condition | Interest Rate |
234B | If at least 90% of the total tax is not paid before the financial year ends | 1% per month on the outstanding tax amount |
234C | If advance tax instalments are not paid as per schedule | 1% per month on the shortfall amount |
Interest is computed on a simple interest basis and is applicable from the due date of the instalment until the date of actual payment.
Advance tax is an important compliance requirement under the Income Tax Act. It applies to individuals and entities with a tax liability exceeding Rs. 10,000 in a financial year. Timely payment of advance tax helps in avoiding interest penalties and managing tax obligations effectively. Taxpayers can pay advance tax through designated bank branches or the online tax payment portal provided by the government.
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Advance tax payments help taxpayers avoid a lump sum tax burden at the end of the financial year and prevent interest penalties for delayed payments.
Advance tax is applicable to individuals, self-employed professionals, businesses, and corporate entities whose total tax liability exceeds Rs. 10,000 in a financial year.
Advance tax is paid in instalments as per the schedule:
Senior citizens aged 60 years and above who do not have income from a business or profession are exempt from paying advance tax.
Non-Resident Indians (NRIs) are liable to pay advance tax if they have taxable income exceeding Rs. 10,000 in India.
The advance tax payment status can be checked through the Income Tax Department’s e-filing portal by using the Challan Identification Number (CIN) or through the bank’s online payment portal.
Taxpayers can request a correction by submitting a request to the bank where the tax payment was made or by submitting an online request through the Income Tax e-filing portal.
The challan correction feature can be accessed through the e-filing portal of the Income Tax Department. Corrections can be requested for details like Assessment Year, PAN, and tax amount.
Yes, advance tax can be paid after the due date, but interest under Sections 234B and 234C may be applicable for delayed payment.
There is no upper limit on advance tax payment. The taxpayer must ensure that the advance tax paid covers at least 90% of their total tax liability for the financial year to avoid interest under Section 234B.
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Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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