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Published on:

November 28, 2024

Alankar Mishra

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Basics of GST

Advance Tax: Due Dates, Rules and How to Pay it

Advance Tax is a payment system instituted by taxpayers to pay their income tax in instalments throughout the financial period instead of at the end. This system is mandatory for an individual or a company who is estimated to owe a tax of more than ₹10,000 in a financial year. Advance tax facilitates timely revenue collection so that the taxman can avoid being under financial strain at the end of the year. This article discusses the advance tax due dates, relevant rules and procedures for making payments for advance tax.

What is Advance Tax?

“Pay as you earn” is a type of taxation that can apply to salaried employees, freelancers, and all such business persons who earn taxable income within a financial year. Due to the provisions made in the Income Tax Act, tax need not be paid as a lump sum at the end of the financial year, instead, the tax is required to be paid in instalments.

Who Should Pay Advance Tax?

Advance tax applies to these categories of taxpayers:

Salaried Employees One-off salaried: Earning Individuals who also receive other incomes like rent, capital gains, and income from businesses or professions.

Freelancers, Consultants & Professionals: independent professionals offering services and getting paid for them.

Businesses: Corporatum, proprietorships, or partnerships with relievable profits.

Taxpayers opting for the Presumptive Taxation scheme: For such people, or businesses enrolling themselves under presumptive taxation scheme 44AD or 44ADA, advance tax can be paid once for the entire taxable amount.

Exemptions from Advance Tax

You do not need to pay advance tax if:

If you expect your total tax liability for the relevant financial year to be less than ₹10,000.

If you are a senior citizen (aged 60 years or more) who does not earn income from business or profession.

Advance Tax Due Dates

The advance tax liability must be paid in instalments according to the schedule provided by the Income Tax Department. The due dates and percentage of tax payable are as follows:

Due Date	Tax to be Paid (as a % of total tax liability)
On or before 15th June	15% of the total tax
On or before 15th September	45% of the total tax (including the 15% paid earlier)
On or before 15th December	75% of the total tax (including the earlier payments)
On or before 15th March	100% of the total tax (final instalment)

For taxpayers under the presumptive taxation scheme, 100% of the advance tax must be paid by 15th March in a single instalment.

How to Calculate Advance Tax

1. Estimate Total Income: Determine all sources of income such as salary, income from business, other sources which include capital gains, and income from letting out house property.

Total Income = Income from Salary + Income from Business + Income from Other Sources

2. Deduct Expenses and Exemptions: Deduct the eligible exemptions and the deductions under section 80C or any other section like 80D of the Income Tax Act.

Taxable Income = Total Income - Allowable Deductions and Exemptions.

3. Calculate Taxable Income: Arrive at the taxable income after the deductions, as per the current income tax slab.

Taxable Income = Total Income - Total Exemptions and Deductions.

4. Estimate Total Tax Liability: Arrive at the amount of tax that is to be paid on income which is not exempt from tax.

Tax Liability = Apply Income Tax Slabs to the Taxable Income

5. Deduct TDS: Account for TDS that is already paid out about your income.

Net Tax Liability = Total Tax Liability - TDS Already Paid.

6. Determine Advance Tax: Pay taxes in advance by the schedule if the unclaimed tax liability exceeds ₹10,000.

How to Pay Advance Tax

Advance tax can be paid online or offline. Below is a step-by-step guide for both methods:

Online Payment

1. You can either log on to the official website of the Income Tax Department or the NSDL site which is authorized.

2. For advance tax payments, you need to select Challan 280.

3. You need to choose any applicable tax type; Self Assessment/Advance Tax.

4. Fill out the form with your PAN number, the relevant assessment year, and other requirements.

5. Pay the indicated amount through the use of the internet banking system, or debit card.

6. Make sure to keep the receipt for proof.

Offline Payment

Take steps to visit an authorized bank branch and in the process take with you a duly completed Challan 280.

When there, take the payment amount and have it with you together with the challenge.

Retain the stamped receipt to show that one has made the payment.

Rules for Non-Payment or Late Payment

Sections 234B and 234C of the Income Tax Act impose penalties on taxpayers who fail to pay advance tax or do so after the due dates:

1. Section 234B:

In case of not paying at least 90% of the total tax liability as advance tax by the end of the financial year.

Penalty: 1% of the amount due/unstated per month as interest.

2. Section 234C:

Applies to the overdue payment of a single instalment.

Pending amount sufficiency: Penalty at the rate of 1% of the shortfall amount per month.

Benefits of Paying Advance Tax

1. Avoids Last-Minute Tax Burden: Advance tax seeks to smooth out tax liability across the financial year, thus preserving liquidity.‍

2. Avoids Penalties: Paying tax in advance helps in avoiding the interest and penalties as outlined under sections 234B and 234C.

3. Improves Financial Planning: Timely payment of taxes is beneficial such that there is payment within the income-earning period.

4. Ensures Compliance: Payment of advance tax demonstrates compliance with tax obligations and assists in upholding tax status.

Common Mistakes to Avoid

1. Incorrect Income Estimation: When one fails to account for income from multiple sources, such a person might end up paying comparatively lower advance tax.

2. Ignoring TDS Deduction: In case the TDS amount is ignored, there exists a probability that tax is paid in excess.

3. Missing Deadlines: The non-payment of advance tax liabilities on time results in penal charges which increases tax liabilities.

4. Using the Wrong Assessment Year: While making the payment, ensure that he or she has mentioned the correct assessment year in order to avoid such issues.

Conclusion

Like most of the obligators in India, advance tax is one designated obligation which must not be ignored. People can avoid penalties or manage their tax liabilities without much worry by making provisions for due dates, rules, and payment procedures. There is more to advance tax than just its payment NT, which has to be done on the stipulated dates to remain compliant and is necessary for timely and effective financial management. For every tax assessor; employed person, freelancer or owner of firms, this helps avoid confusion whenever an advance tax is mentioned.

FAQs

1. What are the advance tax payment dates?

Advance tax must be paid in four instalments:

15th June: 15% of total tax liability.

15th September: 45% cumulative.

15th December: 75% cumulative.

15th March: 100% cumulative.

2. What is the advance tax slab?

Advance Tax is applicable if your total tax payable goes above the statutory limit of ₹10,000 in a financial year. This applies to almost all individuals and businesses except senior citizens not in professions or business.

3. Who is liable to pay advance tax?

The following individuals must pay advance taxes:

Salaried people who also have other income sources such as rental or capital gains.

Freelancers, professionals, businesses, etc.

Senior citizens engaged in business.

4. Is advance tax applicable to senior citizens?

Senior citizens over the age of sixty do not need to pay advance tax if they do not have income from business or practising a profession. The other senior citizens are required to pay if their tax provides: the amount of tax liability is above ₹10,000.

5. What happens if advance tax is not paid on time?

Failure to make timely payments or non-payment at all attracts the following interest charges:

Section 234B: 1% per month for underpayment of at least 90% of the total tax due by 31st March of the applicable Assessment Year.

Section 234C: 1% per month for default in payment.

6. What are the rules for advance tax payment?

огераногерногераюнштугрншутгршту Advance tax liability needs to be prepared ahead of time and paid in quarters; self-employed people generally do not need to pay this tax unless there are other sources of income. Businesses paying presumptive taxation should pay for all amounts by March 15.