Home Financial Planning Advance Tax: Particulars,What, How, Why

Advance Tax: Particulars,What, How, Why

Advance Tax: Particulars,What, How, Why


If the whole tax payable in a monetary 12 months is Rs. 10000 or extra, then an individual has to pay Advance tax. Advance tax means earnings tax ought to be paid prematurely as a substitute of lump sum fee at year-end. You pay this tax within the monetary 12 months previous the evaluation 12 months in 4 installments and the due dates are 15 June, 15 September, 15 December and 15 March. All of the taxpayers are coated by the advance tax. For salaried individuals, TDS is deducted by the employer from wage however when you’ve got sources of earnings like curiosity on deposits and your tax legal responsibility for the 12 months exceeds Rs 10,000 after your employer has deducted the TDS then you must pay Advance Tax. Senior citizen (age of 60 years or extra) who shouldn’t be operating a enterprise is exempted (from Price range 2012). This text is all about Advance Tax for people.

On this world nothing is definite however loss of life and taxes mentioned Benjamin Franklin

(Founding father of USA and face on America’s  100 greenback invoice/notice).

Advance tax, because the title implies, is the tax that one pays prematurely. Advance tax is the earnings tax that’s payable in case your tax legal responsibility exceeds Rs 10,000 and ought to be paid in the identical 12 months during which earnings is obtained. It is usually referred to as as “Pay as you Earn” scheme because you pay the tax in the identical 12 months during which you earn earnings.

In case you are a Salaried worker and have earnings aside from earnings from wage then you need to test Advance Tax.

In case you are Freelancer, Professionals, companies, YouTuber, Blogger then you must know and pay Advance Tax

  •  In case you estimate that you’ll owe greater than Rs.10,000 on March 31  in taxes (after deducting TDS) then you need to pay advance tax.
  • You pay this tax in 4 installments and the due dates with Share of Advance Tax to be paid are 15 June(15%), 15 September(45%), 15 December(75%) and 15 March(100%).
  • If the Earnings Tax shouldn’t be payable as per the above schedule, Curiosity is liable to be paid for late fee of tax as follows
    • Curiosity underneath part 234B @ 1% per 30 days
    • Curiosity underneath part 234C  @ 1% per 30 days is payable if 90% of the tax shouldn’t be paid earlier than the tip of the monetary 12 months
  • Advance Tax will be paid by submitting a Tax Cost Challan,ITNS 280.Challan
    • Tax relevant: For particular person Choose 0021 : INCOME-TAX (OTHER THAN COMPANIES)
    • Kind of Cost: Kind of fee is dependent upon why you might be paying earnings tax. Enter 100 for Advance Tax.
  • You have to declare Advance Tax whereas submitting Earnings Tax Return ITR

Who has to pay Advance Tax?

The provisions of the Earnings Tax Act make it compulsory for each particular person, self-employed skilled, businessman, and company to pay Advance Tax, on any earnings on which TDS(Tax Deducted at Supply) shouldn’t be paid. Each people, in addition to corporates, should pay this tax.

Advance Tax for Salaried Worker

If a person’s solely earnings is his wage, then the employer will deduct tax from his earnings(TDS) and submit it. In such a case there isn’t a trigger for fear over advance tax fee. The tax deducted shall be made out there to the worker by the employer in Kind 16.

However when a Salaried worker has earnings aside from earnings from wage then he has to fret about Advance Tax. Ex earnings from different sources resembling curiosity gained (on saving checking account), capital positive aspects, lottery wins, from home property or from enterprise, then advance tax turns into related.

If one estimates that one will owe greater than Rs.10,000 on March 31  in taxes (after deducting TDS) then you need to pay advance tax.

Freelancers, Professionals, companies, YouTuber

Presumptive earnings for Professionals: Impartial professionals resembling medical doctors, attorneys, architects, and so on. come underneath the presumptive scheme underneath part 44ADA. They should pay the entire of their advance tax legal responsibility in a single installment on or earlier than 15 March. They will additionally pay the complete tax due by 31 March.

Presumptive earnings for Companies: The taxpayers who’ve opted for a presumptive taxation scheme underneath part 44AD should pay the entire quantity of their advance tax in a single installment on or earlier than 15 March. In addition they have an choice to pay all of their tax dues by 31 March.

Who doesn’t should pay Advance Tax?

Advance Tax is NOT relevant when

  • A senior citizen (the resident particular person who’s 60 yrs or extra) who would not have any earnings from enterprise & occupation, doesn’t should pay advance tax. This transformation was launched from AY 2013-14. Extra particulars at Senior Citizen : Earnings and Tax
  •  If one adopts presumptive taxation then one has to declare earnings on the prescribed charge and no different deductions are allowed. One has to pay your entire advance tax by 15 March. That is relevant for 

Learn how to discover if you must pay advance tax

As we all know there are 5 forms of Earnings, Earnings from Wage, Earnings from Home Property(Any residential or business property that you just personal shall be taxed), Earnings from Capital Good points (Whenever you promote Mutual Funds, Shares, Bond, Gold, Land or Property, Earnings from Income and Good points of Enterprise or Career & Earnings from Different Sources. Particulars in our article Perceive Earnings Tax

For advance tax test

  • Earnings from Home Property: You probably have rental earnings.
  • Earnings from Capital Good points: Have you ever bought Mutual Funds, Shares, Bond, Gold, Land, or Property.  Tax categorised as Lengthy Time period Capital Achieve Tax(LTCG) and Brief Time period Capital Achieve(STCG) relies on the asset you bought, the time interval you owned the asset. Particulars in our article Capital Achieve Calculator on Sale on Property, Mutual Funds, Gold, Shares
  • Earnings from Income and Good points of Enterprise or Career: The earnings chargeable to tax is the distinction between the credit obtained on operating the enterprise and bills incurred.
  •  Earnings from Different sources: Test the following earnings. Particulars in our article Earnings From Different Sources
    • the curiosity of Saving Financial institution Account,
    • Curiosity from Mounted Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS) and so on
    • Curiosity from Earnings Tax Refund
    • Household Pension
    • Dividend Earnings: Dividend obtained on or after 1 April 2020 is taxable within the palms of the investor/shareholder. Particulars in our article Dividend and Tax

What if we don’t pay Advance Tax?

If you must pay advance tax and In case you fail to pay your Advance Tax or, if you happen to pay lower than the stipulated tax, you’d be penalised and must pay further underneath Sections 234A, 234B, 234C. So there isn’t a escaping Tax.  Because the Earnings Tax workplace says “Pay Tax Karo Chill out

The curiosity is calculated at 1% easy curiosity per 30 days on the defaulted quantity for 3 months. The curiosity penalty would proceed as much as the following deadline. If even after the final deadline of 15 March, the tax shouldn’t be paid, then the 1% can be on the defaulted quantity for a month, till the tax is absolutely paid.

Why Pay Advance Tax?

Advance tax is likely one of the main instruments utilized by the Govt. to gather tax from the assesses throughout India. This pay as you go type of tax is designed in such a method that an assessee is made to pay tax to the Govt. in a ‘Pay as You Earn Scheme’. This primarily goals at decreasing the last-moment hassles to an assessee for fee of tax legal responsibility which can be due to both scarcity of time or funds.

The goal of the Indian authorities behind establishing the advance tax system was to hurry up the tax assortment. This method additionally allowed the federal government to earn curiosity on the quantity collected as tax, thus growing funds to the federal government coffers.
why tax

How is advance Tax Calculated?

Advance tax is computed on earnings that a person may earn through the 12 months,  in that sense, it’s estimated earnings. The tax is calculated utilizing the charges relevant for the monetary 12 months.

Suppose after paying your first installment of tax on the estimated earnings, your precise earnings elevated resulting from some shares/mutual funds you bought, You will have to revise your earnings and accordingly pay the differential within the subsequent installment.

Though Advance Tax is liable to be paid on all incomes together with Capital Good points, it’s troublesome to estimate the Capital Good points which can come up in an 12 months. Subsequently, in such circumstances, it’s supplied that if any such earnings arises after the due date of any installment, then, your entire quantity of tax payable on such capital achieve (after claiming exemption underneath part 54) shall be paid in remaining installments of Capital Good points that are due. If your entire quantity of tax payable is so paid, then no curiosity on late fee shall be levied

Listed under are the steps to calculate advance tax:

  • Decide the Earnings: Decide the earnings you obtain aside from your wage. It’s essential to incorporate any ongoing agreements which may pay out later.
  • Minus the Bills: Deduct your bills from the earnings. You’ll be able to deduct bills associated to your work (freelancing) resembling lease of the work place, journey expense, web and telephone prices.
  • Complete the Earnings: Add up different earnings that you just may obtain within the type of lease, curiosity earnings, and so on. Deduct the TDS deducted out of your salaried earnings.
  • Complete Advance Tax: If the tax due exceeds Rs.10,000 you then’ll should pay advance tax.

Advance tax Charges and Dates

From FY 2016-17  For each particular person and company taxpayers

Due Date Advance Tax Payable
On or earlier than fifteenth June 15% of advance tax
On or earlier than fifteenth September 45% of advance tax
On or earlier than fifteenth December 75% of advance tax
On or earlier than fifteenth March 100% of advance tax

Beneath are the dates and percentages earlier than FY 2016-17.

Due Date Installment % of Advance Tax
fifteenth September Up-to 30%
fifteenth December Up-to 60%
fifteenth March Up-to 100%

For instance, suppose your whole tax legal responsibility(after deducting TDS)  for this 12 months is Rs 1,00,000

So by fifteenth June you will have to pay 15% which involves Rs 15,000
So by fifteenth September you will have to pay 45% which involves Rs 45,00
By fifteenth December you’ll have to cowl 75%, so you will have to pay one other Rs 75,000.
By fifteenth March, 100% of advance tax involves Rs 100,000, you will have to pay one other Rs 25,000.

Penalty on not paying/paying much less Advance Tax: Sections 234A, 234B and 234C

In case you owe greater than Rs.10,000(after deducting TDS) whereas submitting your returns, you’ll be penalized with  Curiosity underneath sections 234A , 234 B & 234 C

Underneath Part 234C, there are three parts. For the primary instalment, the shortfall penalty is calculated for 3 months @1% p.m. Equally, within the second instalment, the shortfall penalty can also be calculated for 3 months @1% p.m and the ultimate instalment is calculated at a flat charge if 1% for 1 month solely.

Underneath part 234B, penalty arises when the whole quantity of advance tax paid together with the quantity of TDS is lower than 90% of the whole tax legal responsibility. In such a case, curiosity is calculated at 1% per 30 days of the quantity of shortfall for the time interval from April to the month during which the return is filed.

Underneath part 234A, the legal responsibility arises solely when the return is filed after the due date which for AY 2020-21 is 30 Nov.

Finotax has nice Advance tax calculators. Test it out right here. Let’s have a look at these sections intimately.

Curiosity underneath part 234 C

234 C shall be relevant if you happen to don’t pay your advance taxes in common installments.  As per the Earnings Tax Act, you’re alleged to pay 15% of advance tax by 15 Jun, 30% of your advance tax by fifteenth Sep, 60% by fifteenth December and 100% by fifteenth March. Let’s see it by means of some examples.

Mr. Khushal is operating a clothes store. Tax Legal responsibility of Mr. Khushal is Rs 45,500. He has paid advance tax as given under:

Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September,  Rs. 12,000 on fifteenth December,  Rs. 14,500 on fifteenth March.  Is he liable to pay curiosity underneath part 234C, if sure, then how a lot?

Any tax paid until thirty first March shall be handled as advance tax. Contemplating the above dates, the advance tax legal responsibility of Mr. Khushal at completely different installments shall be as follows:

1) In first installment: Not lower than 15% of tax payable ought to be paid by fifteenth June. The tax legal responsibility is Rs. 45,500 and 15% of 45,500 quantities to Rs. 6,825. Therefore, he ought to pay Rs. 6,825 by 15thJune. He has paid Rs. 8,000, therefore, there isn’t a quick fee in case of first installment.

2) In second installment: Not lower than 45% of tax payable ought to be paid by 15thSeptember. Tax legal responsibility is Rs. 45,500 and 45% of 45,500 quantities to Rs. 20,475. Therefore, he ought to pay Rs. 20,475 by fifteenth September. He has paid Rs. 8,000 on fifteenth June and Rs. 11,000 on fifteenth September (i.e. whole of Rs. 19,000 is paid until 15thSeptember). There may be quick fee of Rs. 1,475 (i.e. Rs. 20,475 – Rs 19,000).

Although there’s quick fee of Rs. 1,475 however Mr. Khushal won’t be liable to pay curiosity underneath part 234C as a result of he has paid minimal of 36% of advance tax payable by fifteenth September. He has paid Rs. 19,000 until fifteenth September and 36% of 45,500 quantities to Rs. 16,380. Therefore, no curiosity shall be levied in case of deferment of second installment.

3) In third installment: Not lower than 75% of tax payable ought to be paid by fifteenth December. Tax legal responsibility is Rs. 45,500 and 75% of 45,500 quantities to Rs. 34,125. Therefore, he ought to pay Rs. 34,125 by fifteenth December. He has paid Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September and Rs. 12,000 on fifteenth December (i.e. whole of Rs. 31,000 is paid until 15thDecember). There’s a quick fee of Rs. 3,125 (i.e. Rs. 34,125 – Rs 31,000). Therefore, he shall be liable to pay curiosity underneath part 234C on account of quick fall of Rs. 3,125 (*).

There’s a quick fall of Rs. 3,125 in case of third installment. Attributable to quick fall in case of third installment, curiosity underneath part 234C will be levied. Curiosity shall be levied at 1% per 30 days or a part of the month on the quick paid quantity of Rs. 3,100 (i.e. Rs. 3,125 rounded off to Rs. 3,100 as per Rule 119A). Curiosity shall be levied for a interval of three months. In different phrases, curiosity shall be levied on Rs. 3,100 at 1% per 30 days for 3 months. Curiosity underneath part 234C will come to Rs. 93.

4) In final installment: 100% of tax payable ought to be paid by fifteenth March. The entire tax legal responsibility of Rs. 45,500 is paid by Mr. Khushal by fifteenth March (i.e. 8,000 on fifteenth June, Rs. 11,000 on15th September, Rs. 12,000 on fifteenth December and Rs 14,500 on fifteenth March). Therefore, there isn’t a quick fee in case of final installment. Thus, Mr. Khushal won’t be liable to pay curiosity underneath part 234C in case of final instalment.

Curiosity underneath part 234 B

234 B shall be relevant when the whole advance tax paid is lower than  90 % Tax Payable.  This shall be charged at 1% per 30 days until you pay your remaining taxes. Let’s work it out by means of an Instance:

Mr. Suraj is a businessman. His tax legal responsibility as decided underneath part 143(1) is Rs. 28,400. He has not paid any advance tax however there’s a TDS credit score of Rs. 10,000 in his account. He has paid the stability tax on thirty first July i.e. on the time of submitting the return of earnings. Will he be liable to pay curiosity underneath part 234B, if sure, then how a lot

On this case, the tax legal responsibility (after permitting credit score of TDS) of Mr. Suraj involves Rs. 18,400 (i.e. Rs. 28,400 – Rs. 10,000) which exceeds Rs. 10,000 and therefore, he shall be liable to pay advance tax. He has not paid any advance tax and therefore, he shall be liable to pay curiosity underneath part 234B. Curiosity underneath part 234B shall be levied at 1% per 30 days or a part of the month. In this case, Mr. Suraj has paid the excellent tax on thirty first July and therefore, curiosity underneath part 234B shall be levied for the interval from 1st April to thirty first July i.e. for 4 months. Curiosity shall be levied on unpaid tax legal responsibility of Rs. 18,400. Curiosity at 1% per 30 days on Rs. 18,400 for 4 months will come to Rs. 736.

In case you pay our taxes in between April – July interval then curiosity @1% shall be utilized solely on the stability tax payable .

On-line Advance Tax Calculators(Free)

If you wish to cross-check your advance tax or calculate I like to recommend Finotax.com:Detailed Calculator,reveals all steps. Test it out right here.

Video on Advance Tax

This 8:32 video explains Advance Tax.

This video talks about how one can Calculate Advance Tax

Learn how to pay advance Tax?

You’ll be able to pay advance tax in India by means of two strategies: on-line or offline. Right here’s a breakdown of each:

On-line Cost:

  1. Go to the Earnings Tax Division’s e-payment web site: [income tax e payment ON Income Tax Department portal.incometax.gov.in]
  2. Enter your PAN and cellular quantity and proceed after verification with OTP.
  3. Choose the Evaluation Yr (2024-25 for present state of affairs) and select “Advance Tax (100)” underneath Kind of Cost.
  4. Fill within the challan particulars like State Code, circle code (refer web site for particulars).
  5. Select the fee methodology (web banking or debit card) and your financial institution.
  6. Preview the challan for accuracy and click on “Pay Now” to finish the fee.

Offline Cost:

  1. Obtain Challan 280 kind from the Earnings Tax Division web site.
  2. Fill the challan with particulars like your PAN, evaluation 12 months, tax sort (100 for Advance Tax).
  3. Point out the installment quantity (is dependent upon the due date).
  4. Submit the finished challan at any financial institution approved to gather tax funds.

Further Suggestions:

  • Use an advance tax calculator to estimate your tax legal responsibility for correct fee.
  • Make a copy of the challan (on-line fee receipt or Challan 280 copy) for record-keeping throughout ITR submitting.
  • The final date for the present installment (March 2024) is March fifteenth, so make sure you pay earlier than the deadline to keep away from curiosity penalties.

Advance Tax will be paid by submitting a Tax Cost Challan,ITNS 280.Challan, at designated branches of banks empanelled with the Earnings Tax Division. Branches of ICICI, HDFC and SBI settle for Advance Tax Cost Challans. Alternatively, people may pay Advance Tax on-line by means of the Earnings Tax Dept / NSDL web site. e-Cost facilitates fee of direct taxes on-line by taxpayers. To avail of this facility the taxpayer is required to have a net-banking account with any of the Approved Banks.

Video on Learn how to Pay Advance Tax

Confirm Advance Tax in Kind 26AS

Half C of Kind 26AS has particulars of Tax Paid (aside from TDS or TCS). You probably have paid Advance Tax or Self Evaluation Tax it will seem on this part.  Please confirm that advance tax or self evaluation tax particulars are displaying up in Kind 26AS, In the event that they don’t match along with your particulars please contact the Financial institution.

Present Advance Tax in ITR

After paying earnings tax by means of Challan 280 what subsequent? Is your duty over. No. That you must present the tax paid in your ITR, You probably have paid Advance/ Self Evaluation tax by means of Challan 280 fill within the particulars in Tax paid and guarantee that your tax legal responsibility is 0 earlier than submitting the return as defined for ITR1 in our article Fill Excel ITR1 Kind : Earnings, TDS, Advance Tax and proven in picture under.

Fill Self Assessment Details in ITRFill Self Assessment Details in ITR

Fill Self Evaluation Particulars in ITR

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