Advance Tax Payment : Calculations & Important Dates

Updated: 01-04-2024 11:39:45 AM

Advance tax is to be paid on the basis of estimated income during the year. A person has to pay advance tax only when the total tax liability exceeds Rs 10,000 in a financial year. Usually, it is expected that you will earn the income first and then pay the taxes on it. However, in case of advance tax, an assessee has to estimate his income for the year and pay the taxes partially or fully in advance.

 

Who is Liable to Pay Advance Tax

• Advance tax applies primarily to self-employed people like businessmen, professionals, freelancers, etc. NRIs who have income of more than Rs 10,000 in India are also liable to pay advance tax.
• Senior citizens who do not have any income from business and profession are exempt from paying advance income tax.
• Salaried individuals do not have to pay advance taxes since their taxes are already deducted at source when the salary is released. In fact, any kind of assessee whose tax is deducted at source will not have to make advance payment of tax. For example, a freelancer works for two clients of which one sends him the amount after TDS deduction whereas the other doesn’t. In such cases, advance tax needs to be paid for the second client only as the first one has already deducted tax at source.
• Starting with the Financial Year 2016-17, those who opt for the presumptive scheme under the Income Tax Act are required to pay the entire amount of their advance tax on or before 15th of March. A grace period of 15 days, that is, till 31st March is also allowed. Presumptive taxation scheme is offered to small businesses wherein the business income is presumed at 8% of the turnover or gross receipts of the given business year. In case the gross receipts/turnover is received by way of an account payee bank draft or account payee cheque or with the use of electronic clearing system, the business income should be calculated at 6% of the turnover. The amount calculated thereafter becomes the final taxable income for the business and the advance tax should be paid on this amount.

Advance Tax Due Dates

The following are the advance tax payment due dates for different categories of taxpayers:

1. Advance Tax Due Dates for Individuals and Corporate Taxpayers

Due Date of Instalment	Amount of Advance Tax Payable
On or before 15th June	15% of Advance Tax
On or before 15th September	45% of Advance Tax minus the previous instalment
On or before 15th December	75% of Advance Tax minus the previous instalments
On or before 15th March	100% of Advance Tax minus the previous instalments

2. Advance Tax Due Dates for Small Businesses who have opted for presumptive taxation scheme

Such business taxpayers will have to pay the entire amount of their advance tax on or before 31st March of every year. The taxes should be calculated at 6% or 8% of their business receipts for the given year, based on the mode of such receipt.

Advance Tax Calculation

Advance tax installments are to be paid on the basis of estimated income for a financial year. You can take deductions like Section 80C into account while estimating your tax liability. It is usually done on the basis of previous income trends of the taxpayer. The assessee has to estimate his future income and pay the taxes accordingly. This calculated income will be reduced by TDS deducted, TCS collected, MAT /AMT credit and any relief under tax-treaty. After making the first two installments, the assessee can also revise the estimated income and pay the next installments accordingly.

Unlike other cases where the government asks for tax payment, here the onus is on the taxpayer to calculate his income for an assessment year and make the payments in advance in the current financial year. The reason why this is done is because the person who earns the income will know the future trends better than the tax authorities. You can use the Income Tax department’s online Advance Tax Calculator to compute the advance tax payable.

For example, a businessman Ravi Prasad estimated his taxable income at Rs 10,00,000.

The taxes to be paid on this income (assuming no deductions are claimed) will be Rs 1,12,500.

According to the rule, he will have to pay this advance tax in four installments, as shown below-

Due Date	Advance Tax Payable	Amount
On or before 15th June	15% of Advance Tax	16,875
On or before 15th September	45% of Advance Tax	33,750
On or before 15th December	75% of Advance Tax	33,750
On or before 15th March	100% of Advance Tax	28,125

Interest Charges on Short Payment of Advance Tax Instalment

Under section 234B, if the assessee has not paid any advance tax or paid an amount during the year which is less than 90 percent of his total advance tax liability, interest will be charged at the rate of 1% per month starting from 1st April of the financial year. In other words, if you pay your advance tax by 31st March of the relevant financial year, you will not be liable to pay interest.

For example, Nisha calculated her total tax liability at Rs 50,000 but she made this payment on 15th June, at the time of filing her tax returns. So, she will have to pay interest @1% on the amount for three months- April, May and June.

1% of 50,000= Rs 500

For three months, the interest will be Rs 500 x 3 = Rs 1,500

Hence, Nisha will have to pay an interest of Rs 1,500 for not making the advance tax payment.

Nisha’s friend Rahul’s net taxable income during the year was Rs 65,000. However, he made a payment of Rs 55,000 when he was filing his ITR in the end of May. Since this amount is less than 90% of his total tax liability, he was also required to pay the interest at 1% on the balance amount.

1% of 10,000 for two months April and May = Rs 200

Know the Latest Income Tax Slabs FY 2024-25

How to Pay Advance Tax Online

A number of bank branches have been authorised by the Income Tax Department for receiving Advance Tax payment on behalf of the government. You can visit any of the bank branches and make the required payment. Alternatively, you can make advance tax payment online by visiting the official website of the income tax department.

1. Visit the e-payment facility on the website of Income Tax Department.
2. Choose the right form for the payment of Advance Tax. For individuals it is ITNS 280.
3. Select the correct code for Advance Tax. The code number applicable is 100.
4. Fill out your PAN, name, address, email address, number etc
5. Once you click on proceed, you will be redirected to the net banking page or debit card payment gateway, whichever you have opted for.
6. Make the advance tax payment online.
7. After making the payment, you will get the receipt called Challan 280 on the next screen. Save a copy of the advance tax challan as you will need it at the time of filing ITR.

Refund in Advance Tax Payment

In case you have made an extra payment towards the advance tax, you can claim a refund by filling and submitting Form 30. This refund claim must ordinarily made in the income tax return filed before July 31st but in all cases, must be made within 1 year of the end of the relevant assessment year. For example for financial year 2018-19, the assessment year in 2019-20. Hence the refund claim must ordinarily be made by filing your return before 31st July 2019. In all cases, it has to be made before 31st March 2020.

Read more: How to File an Income Tax Return Online

FAQs

Q. Is advance tax compulsory?

According to Section 208 of the Income Tax Act 1961, every person whose estimated tax liability for the year is greater than or equal to Rs. 10,000 is liable to pay advance tax. However, senior citizens aged above 60 years and who do not have any income from business or profession are not entitled to make advance income tax payment.

Q. Will any tax payable till 31st March be treated as advance tax?

Yes, any tax paid till 31 March will be treated as advance tax payment.

Q. Is it possible to claim a deduction under Section 80C when estimating income for determining advance tax?

Yes, you can consider all these deductions while estimating your income for the year when calculating your advance tax liability.

Know more on Section 80C

Q. Can I make advance tax payment at a bank branch?

Yes, you can pay advance income tax at a bank branch.

Q. What are exemptions in advance tax payments?

• Senior citizens aged 60 years and above are exempted from paying advance tax
•  Salaried individuals who fall under TDS net are exempted from paying advance tax. However, earnings from other sources  such as capital gains, interest income,  rent and/or other non-salary income will attract advance tax
• If the amount of TDS deducted exceeds that tax payable for the year, then you are not required to pay advance tax

Q. What are benefits of paying advance tax?

• Advance tax payment helps reduce the stress of taxpayers. By making tax payment in advance they do not have to worry about shortage of money or last-minute payments.
• Advance tax payments speeds up the tax collection process.
• Helps people avoid defaulting on their payments.
• It helps increase government funds as the government can earn interest on the collected amount.
• It helps businesses in better management of finances and gives them an idea of the income they have earned during the year.

Q. What penalties will be levied if the advance tax is not paid?

In case the advance tax is not paid by the due date a penalty of 1% will be levied.