Advance Tax Payment

• 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, freelancers, and businesses. Senior citizens, who are 60 years or older, and do not run a business, are exempt from paying advance tax.
• Those taxpayers who have opted for a presumptive taxation scheme under section 44AD have to pay the whole amount of their advance tax in one instalment on or before 15th March every year. They also have an option to pay all of their tax dues by 31st March.
• Independent professionals such as doctors, lawyers, architects etc. come under the presumptive scheme under section 44ADA. They have to pay the whole of their advance tax liability in one instalment on or before 15th March. They can also pay the entire amount by 31st March.

Advance Tax Payment Timelines

Payment of advance tax: Self-employed and businessmen

Payment of advance tax: Companies

If you are a salaried employee you need not pay advance tax as your employer deducts tax at source (TDS). Advance tax is applicable when an individual has sources of income other than his salary. For instance, if an assessee earns income via capital gains on shares, interest on fixed deposits, winnings from lottery or races, capital gains on house property besides his regular business or salaried income then after adjusting for expenses or losses he needs to pay advance tax. Even if you are salaried, the advance tax is payable by salaried employees for incomes generated from other sources.

While employers deduct TDS on salaries, advance tax is paid on income that is not subject to TDS. Professionals (self-employed) and businessmen will have to pay taxes in advance as, given their business income, the liability can be huge. The same implies for companies and corporations.

How to file advance tax?

Individuals may pay advance tax using tax payment challans at bank branches authorised by the Income Tax (I-T) Department. It can be deposited with the Reserve Bank of India and all the other authorised banks. Individuals may also pay it online through the I-T department or the National Securities Depository.

You need not worry if you miss the deadline, because if you fail to pay or the amount you’ve paid is less than the mandated 30% of the total liability by the first deadline (15th September), you will need to pay interest. This is computed @1% simple interest per month on the defaulted amount for three months. The same interest penalty would apply if you fail to pay the second deadline (15th December). Failing to pay the third and last deadline (15th March) would mean paying 1% simple interest on the defaulted amount for every month until the tax is fully paid.

And in case you land up paying a higher advance tax than you ought to, you will receive the excess amount as a refund. Interest @6% per annum will be paid by the Income Tax department to the assessee on the excess amount if the amount is more than 10% of tax liability.

Try to treat advance tax as an EMI to the tax department, which eventually helps you pay your income tax without being stressed about it.

Likewise, use the payment of advance tax as an opportunity to stay a step ahead of your tax liabilities, so that you are not left worrying over how much you owe to the tax department at the end of the year, you also save yourself from paying penalties for not paying the taxes in advance. This way, you could contribute in your small way towards nation-building even as the government receives the advance tax money from you, which in turn is used towards infrastructure development of the country.

FAQs

End Note

Apart from tax deducted at source (TDS), the government collects taxes every quarter in the form of advance tax before the end of a financial year, ensuring a constant flow of tax revenue during the year rather than at the year-end. Advance tax means income tax should be paid in advance instead of lump sum payment at year-end. It is also known as pay as you earn tax. These payments have to be made in instalments as per due dates provided by the income tax department.