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Advance Tax Payment Demystified: Learn How to Calculate It

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Synopsis:

In this article, we will discuss how advance tax works. We will find out who needs to pay advance tax, and when. Then we move on to how to calculate the advance tax liability, how to pay it, and all about exemptions and refunds as well. We also touch upon the key benefits of paying advance tax.

Advance tax payment sounds big, but it isn’t complicated at all. It’s just paying your taxes before the year ends. It’s like paying for your meal before you eat it. Only difference in this case, you don’t get anything in return, unless you have paid more. In that case, you will get a refund later. But first let’s focus on the basics. 

What Is Advance Tax Payment Online?

So, what is advance tax? In simple words, advance tax payment means breaking up your income tax payment into parts during the year rather than one-shot payment after the year ends. In other words, it helps both you and the government be at ease with a steady revenue flow to the latter and no huge tax bill shots on you at once. Online tax payment has further smoothened this process by allowing you to do everything from your couch.

Due Date and Amount for Advance Tax

Advance tax payments are made in four instalments throughout the fiscal year. These payments help taxpayers avoid a lump sum payment at the year's end and reduce interest penalties for underpayment.

- 15th June: 15% of your estimated tax liability

- 15th September: 45% of your estimated tax liability

- 15th December: 75% of your estimated tax liability

- 15th March: 100% of your estimated tax liability

Who Is Liable to Pay Tax in Advance?

Do you want to know whether you are supposed to pay advance taxes? If your total tax liability, in a financial year, comes to be more than 10,000 INR, then you are liable to pay advance tax. This holds for all taxpayers—salaried, freelancers, and businesses. Therefore, if you earn an income that arises from any source which is not subject to TDS, you are most likely expected to pay advance tax.

Advance Tax Late Payment & What is Its Interest Rate?

Missed the deadline? Under Section 234B, interest is charged at the rate of 1 percent per month on the unpaid amount. Then, there is Section 234C that slaps 1 percent per month interest for deferring advance tax. Moral of the story? Pay your advance taxes on time to avoid these extra costs.

Advance Tax Calculator: Steps For Calculating Advance Tax Payment

Calculating advance tax is not exactly rocket science. Here's a simple step-by-step guide:

1. Projected Incomes: Salary, rent, business, etc.

2. Less: Expenses: Subtract all expenses that are deductively applicable.

3. Plus: Apply Tax Rates: Calculate the tax liability using relevant tax slab rates.

4. Less: TDS Already Paid: Less TDS, if any, already paid.

5. Calculation of Instalments: Divide the net liability as per due dates mentioned above.

You may use an online advanced tax calculator to make this easier and error-free.

How to Pay Online Advance Tax: A Guide to Understanding

Paying taxes online, especially advance payment of income tax, is a cakewalk. Here's how:

1. Log on to the e-filing portal of the Income Tax Department.

2. Click on 'e-Pay taxes' and log in using your credentials.

3. Fill in the details like PAN, assessment year, address, etc.

4. Choose the appropriate category of tax payment.

5. You can make payments through net banking, debit/credit card, or UPI.

You will get a receipt upon doing so. Keep it for your record.

Advance Tax Payment: Exemptions

Advance tax payment is not everybody's worry. Senior citizens need not be bothered, provided they are 60 years or above and not earning any income from business or profession. Likewise, salaried individuals, normally falling under the TDS net, do not have to pay advance tax as their employers will deduct it anyway.

Advance Tax Payment: Refund

In case you end up paying more advance tax than required, you can claim a refund for the extra amount. You will get the excess amount back after filing your income tax return. Processing of refund is done by the Income Tax Department, and one can easily track it online.

The Key Benefits of Advance Tax Payment

There are many advantages of advance tax payments :

- No Lump-Sum Payment: Break up your taxes and avoid a strain on your finances.

- Avoid Interest Penalties: No hefty interest charges with timely payments.

- Smooth Cash Flow: Assists the government in managing their finances better, which in turn helps the economy.

Conclusion

There you go—advance tax payment demystified. It is just breaking up your taxes into digestible bits over the year. Online platforms make it easier than ever to keep tabs on. Remember, pay on time and keep away from interest penalties; your finances are in order. Take out the date, take the help of an advance tax calculator, and pay your taxes online to always be ahead in the game.

Disclaimer: 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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Frequently Asked Questions

How to check advance tax payment status?

Answer Field

One can check the advance tax payment status only after login into the e-filing portal of the Income Tax Department. Under 'View Form 26AS (Tax Credit)', there one finds the details of all taxes paid, including advance tax.

Can I pay the advance tax at a bank branch?

Answer Field

Yes, you can pay advance tax at designated bank branches. You need to fill a challan with necessary details and deposit the amount in cash or by cheque or demand draft.

What happens if the advance tax paid exceeds the entire tax liability?

Answer Field

In case you end up paying more advance tax than necessary, the excess will be refunded to you once you file your income tax return. The Income Tax Department processes these refunds and transfers the money to your bank account.

Are people over the age of 60 exempt from paying advance tax?

Answer Field

Yes, senior citizens above 60 years who do not have business or professional income are exempt from advance tax payment. Their tax is generally covered by TDS or regular tax payments.

Can I pay advance tax after the due date?

Answer Field

You can, obviously, pay advance tax even after the due date, but you would definitely have to bear some interest penalties for late payment. So, it is desirable to pay on time, avoiding these extra charges.

Will I be penalised if I do not pay advance tax?

Answer Field

Yes, you will face penalties for failure to pay advance tax on time. The interest at the rate of 1 percent per month is charged on the unpaid amount under Sections 234B and 234C of the Income Tax Act.

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