Details on Advance Tax Payment: Advance Tax is a crucial aspect of income tax compliance for taxpayers in India. Failing to pay the tax or paying it partially can result in interest and penalty. Therefore, it is essential to calculate the tax liability accurately and pay the tax on time.
Details on Advance Tax Payment
What is Advance Tax?
Advance Tax is a tax paid by taxpayers on their estimated income for the financial year, in advance. It is also known as pay-as-you-earn tax because the taxpayer is required to pay the tax in installments throughout the year, instead of waiting until the end of the year to pay a lump sum.
Who is required to pay Advance Tax?
All individuals, companies, and firms whose tax liability for the year is more than INR 10,000 are required to pay advance tax. This includes salaried individuals who have income from other sources such as rental income, interest income, etc.
Advance Tax Payment: Who is Required to Pay?
Salaried, freelancers and businesses: Are you a salaried employee, freelancer, or business owner with a tax liability of Rs 10,000 or more in a financial year? If so, you are required to pay advance tax in India. This applies to all taxpayers, regardless of their profession.
Senior citizens: However, if you are a senior citizen aged 60 years or above and do not run a business, you are exempt from paying advance tax. The only exception is if you have business income, in which case you must pay advance tax.
Presumptive income for businesses: If you have opted for the presumptive taxation scheme under section 44AD for your business, you are required to pay the entire amount of your advance tax in a single installment on or before 15th March. Alternatively, you may pay your tax dues by 31st March.
Presumptive income for professionals: For independent professionals like doctors, lawyers, architects, and others who come under the presumptive scheme under section 44ADA, the entire advance tax liability must be paid in a single installment on or before 15th March. However, they also have the option of paying the entire amount by 31st March.
To learn more about presumptive taxation, you can read our detailed guide on the topic. If you require assistance with calculating and paying your advance tax dues, our team of experts can help you navigate the process.
When should Advance Tax be paid? Due Dates For FY 2022-23
Advance Tax should be paid in four installments throughout the year, as per the due dates specified by the Income Tax Department. The due dates for the financial year 2022-23 are:
- 15th June 2022 – 15% of estimated tax liability
- 15th September 2022 – 45% of estimated tax liability
- 15th December 2022 – 75% of estimated tax liability
- 15th March 2023 – 100% of estimated tax liability
|Due Date||Advance Tax Payment Percentage|
|On or before 15th June, 2022||15% of advance tax|
|On or before 15th September, 2022||45% of advance tax less advance tax already paid|
|On or before 15th December, 2022||75% of advance tax less advance tax already paid|
|On or before 15th March, 2023||100% of advance tax less advance tax already paid|
Presumptive Taxation Scheme under Sections 44AD and 44ADA: Who is it for and How Does it Apply to Business Income?
|Due Date||Advance Tax Payment Percentage|
|On or before 15th March||100% of advance tax|
How to Pay Advance Tax Online?
How to Make Tax Payments in India: Step-by-Step Guide”
- Visit the Tax Information Network of the Income Tax Department of India
- Click on the ‘Proceed’ button under the CHALLAN NO./ITNS 280 option
- Fill in the tax applicable, types of payment, mode of payment, PAN, assessment year, and other details mentioned in the challan
- Double-check all the data that you have entered to ensure accuracy
- You will then be redirected to the bank’s website to complete the payment
- After completing the payment, a tax receipt will appear on the next screen that displays payment details, including the BSR code and challan serial number located on the right side of the challan
- Save a copy of this tax receipt for future reference as you will need to enter the BSR code and challan number in your tax return.
Late Payment Interest on Advance Tax: What You Need to Know
Interest on advance tax:
Non-payment of advance tax will attract interest under 234B: If Advance Tax is not paid or paid partially, then the taxpayer may have to pay interest under section 234B and 234C of the Income Tax Act. Additionally, the taxpayer may also be liable to pay penalty under section 221 of the Income Tax Act.
To avoid interest charges, you need to pay at least 90% of your total tax liability as advance tax by March 31st. Failure to do so will result in a penalty of 1% interest on the unpaid amount.
|Particulars||Rate of Interest||Period of Interest||Amount on which interest is calculated|
|If Advance Tax paid on or before June 15 is less than 15%||1% per month||3 months||15% of Amount* (-) tax paid before June 15|
|If Advance Tax paid on or before September 15 is less than 45%||1% per month||3 months||45% of Amount* (-) tax paid before September 15|
|If Advance Tax paid on or before December 15 is less than 75%||1% per month||3 months||75% of Amount* (-) tax paid before December 15|
|If Advance Tax paid on or before March 15 is less than 100%||1% per month||1 month||100% of Amount* (-) tax paid before March 15|
How to calculate Advance Tax?
To calculate Advance Tax, the taxpayer needs to estimate their total income for the financial year and subtract their deductions and exemptions. The remaining amount is the taxable income, and the tax liability can be calculated based on the income tax slabs applicable to the taxpayer.
Q: Who needs to pay advance tax?
A: All taxpayers, including salaried individuals, freelancers, and businesses, who have a tax liability of Rs 10,000 or more in a financial year are required to pay advance tax.
Q: Are senior citizens exempt from paying advance tax?
A: Senior citizens (aged 60 years or more) who do not run a business are exempt from paying advance tax. However, those who have business income must pay advance tax.
Q: How can I pay advance tax?
A: You can pay advance tax online by visiting the Tax Information Network of the Income Tax Department of India and following the necessary steps.
Q: What happens if I fail to pay advance tax?
A: Failure to pay advance tax can result in an interest penalty of 1% on the unpaid amount.
Q: Is there a deadline for paying advance tax?
A: Yes, the deadline for paying advance tax is March 31st of the financial year in which the income is earned. However, taxpayers who have opted for the presumptive taxation scheme under sections 44AD and 44ADA have different deadlines for paying their advance tax.