When taxpayers’ tax legal responsibility in a monetary 12 months exceeds a specific amount, they’re required to pay tax prematurely slightly than wait till the tip of the 12 months. This cost, made in 4 instalments, is called advance tax. On this weblog, we’ll reply what’s advance tax by understanding varied advance tax guidelines and how one can file them on-line in straightforward steps.
What’s Advance Tax?
Let’s start with advance tax which means. Advance tax is a kind of earnings tax you pay beforehand over 4 instalments slightly than in lump sum after the tip of the monetary 12 months. Taxpayers should estimate their annual earnings and calculate their anticipated tax legal responsibility prematurely. If the full tax due (after TDS) comes out to be greater than Rs. 10,000, they have to pay a sure proportion as advance tax in 4 instalments – On or earlier than fifteenth June, fifteenth September, fifteenth December, and fifteenth March to keep away from curiosity penalties.
You might be questioning, why taxpayers have to pay advance tax as an alternative of simply settling the complete quantity whereas submitting their returns on the finish of the 12 months. The explanation for that is that the federal government desires to make sure they obtain a gentle movement of tax income all year long, much like how salaried workers have TDS deducted month-to-month. For taxpayers who don’t have common TDS deductions, like self-employed people, freelancers, enterprise homeowners, and even salaried workers, the advance tax India construction makes positive taxes are paid usually over the 12 months.
Who Ought to Pay Advance Tax?
Advance tax should be paid if one’s tax legal responsibility exceeds Rs. 10,000 in a monetary 12 months, minus the TDS (Tax Deducted at Supply) already deducted or anticipated to be deducted. So in case your complete tax legal responsibility after subtracting TDS remains to be greater than Rs. 10,000, it’s important to pay advance tax in instalments to keep away from curiosity penalties. The precise advance tax proportion relies on the due date introduced by the Earnings Tax Division.
Freelancers, companies and salaried people
If the annual tax legal responsibility is above Rs. 10,000 much less TDS, advance tax should be paid in 4 instalments. It is because whereas salaried people obtain their salaries after relevant TDS deductions, freelancers and companies might not have common TDS on their earnings.
For instance, a freelancer falling within the 30% advance tax slab might have purchasers who deduct solely 10% TDS on funds. This creates a spot between the precise tax legal responsibility (30%) and the TDS deducted (10%), resulting in tax underpayment. Thus the freelancer is required to pay the remaining tax as advance tax to keep away from any penalties.
Professionals (Presumptive earnings)
Professions comparable to attorneys, medical doctors, and consultants, that’s, these taxpayers who work independently and earn earnings and not using a mounted wage, are additionally required to estimate their annual earnings and pay advance tax if their complete tax legal responsibility after TDS goes over the Rs. 10,000 restrict.
Nevertheless, the advance tax slab for particular person professionals choosing the presumptive taxation scheme below Part 44ADA is a bit totally different. Such people don’t have to pay their advance tax in 4 instalments. Quite, they’ll pay their whole tax legal responsibility in a single instalment by fifteenth March.
Companies below presumptive taxation scheme
If a enterprise has opted for the presumptive taxation scheme below Part 44AD, it’s required to pay advance tax if legal responsibility exceeds Rs. 10,000. In contrast to different companies, nonetheless, these below presumptive taxation are allowed to pay their whole advance tax in a single single instalment by fifteenth March, as an alternative of 4 instalments.
NRIs
If an NRI’s complete tax legal responsibility in India (from any taxable Indian sources like capital good points or rental earnings) exceeds Rs. 10,000 after TDS in a monetary 12 months, they have to pay advance tax.
Senior residents
Particular person taxpayers aged 60 years or above are exempt from paying any advance tax, no matter their complete tax legal responsibility. Nevertheless, senior residents who’ve a enterprise or skilled earnings, have to pay advance tax if tax legal responsibility exceeds Rs. 10,000. This may be performed in 4 instalments, or 1 earlier than fifteenth March (below the presumptive taxation system).
Advance Tax Slabs and Charges
There isn’t a separate advance tax slab. Taxpayers have to estimate their annual earnings and pay a proportion of their complete tax legal responsibility earlier than totally different deadlines all through the monetary 12 months. Thus, the advance tax charges are merely the identical because the common earnings tax slabs relevant to the taxpayer.
For instance, if the estimated taxable earnings of a person incomes enterprise earnings is Rs. 20 lakh (after subtracting TDS and deductions), they’d fall below the 30% tax bracket as per the earnings tax slabs. Let’s assume their tax legal responsibility for the 12 months below the brand new regime could be Rs. 3 lakh. This legal responsibility should be cleared in 4 instalments over the course of the monetary 12 months.
The advance tax cost schedule is:
- 15% of complete tax legal responsibility by fifteenth June
- 45% by fifteenth September
- 75% by fifteenth December
- 100% by fifteenth March
- First instalment: 15% of Rs. 3 lakh = Rs. 45,000. This cost is due by fifteenth June.
- Second instalment: 45% of Rs. 3 lakh = 1,35,000. However since Rs. 45,000 was already paid earlier, we’ll subtract it from this instalment. Thus the second advance tax cost by fifteenth September could be Rs. 90,000.
- Third instalment: 75% of Rs. 3 lakh = 2,25,000. Once more, for the reason that first and second instalments already lined Rs. 1,35,000, the cost for the third instalment due by fifteenth December could be Rs. 2,25,000 – Rs. 1,35,000 = Rs. 90,000.
- Fourth instalment: The taxpayer has already paid Rs. 2,25,000 by now, so the remaining tax legal responsibility, that’s, Rs. 3,00,000 – Rs. 2,25,000 = Rs. 75,000 could be paid within the final instalment.
Estimating one’s earnings and tax legal responsibility could be powerful. It’s straightforward to make errors when making advance tax funds, which may result in curiosity penalties for underpayment or further funds that might have been invested elsewhere. A tax advisor may help people and companies optimise their tax financial savings. Their experience can can help you declare all eligible deductions, preserve compliance, file returns conveniently, and keep away from pointless curiosity or penalties.
Advance Tax Due Dates
Now that you already know who ought to pay advance tax let’s perceive the deadlines to keep away from penalties. In line with advance tax guidelines, taxpayers (not below the presumptive taxation scheme) should pay their estimated tax legal responsibility in 4 instalments all through the monetary 12 months.
| Due Date (On or earlier than) | Advance Tax Share |
| fifteenth June | 15% of complete tax legal responsibility |
| fifteenth September | 45% of complete tax legal responsibility |
| fifteenth December | 75% of complete tax legal responsibility |
| fifteenth March | 100% of complete tax legal responsibility |
As we noticed within the instance above, the chances are cumulative, which means we are able to subtract the quantities already paid in earlier instalments from the full due. Additionally, those that have opted for the presumptive taxation scheme will pay their advance tax in a single instalment earlier than fifteenth March.
Failing to pay, or delaying advance tax funds can appeal to penalty curiosity below Sections 234B and 234C of the Earnings Tax Act. The curiosity levied on excellent tax owed can add up shortly, which is why it’s essential to calculate and pay advance tax on time. With the assistance of our professional tax consulting companies, you possibly can precisely estimate your tax legal responsibility, plan your funds effectively, and keep away from any pointless curiosity penalties or compliance points.
The way to Calculate Advance Tax?
You possibly can observe these steps to calculate your advance tax legal responsibility:
- Estimate the full earnings for the monetary 12 months
This consists of all taxable earnings, like skilled, enterprise, rental, capital good points, curiosity, dividend, wage, and so forth. For the reason that applicable quantity of TDS is deducted from wage, salaried people ought to particularly deal with different sources of earnings to see if their tax legal responsibility exceeds Rs. 10,000 after TDS. They might want to pay advance tax on such earnings.
- Subtract any deductions
In case you are planning to file taxes below the previous regime, you could be eligible for a number of deductions on investments, mortgage repayments, insurance coverage premiums, and extra. Calculate these deductions and subtract them from complete earnings to get your taxable earnings.
- Calculate complete tax legal responsibility
The advance tax slab relies on your precise earnings tax slab. Use the newest tax slab charges to calculate your tax legal responsibility for the 12 months. Don’t neglect to account for cess and any relevant surcharge.
- TDS excluding from complete tax legal responsibility
Now that you’ve the full tax legal responsibility, you possibly can subtract the TDS already paid or anticipated together with any relevant reduction (comparable to Part 87A) to find out the advance tax owed. If this quantity exceeds Rs. 10,000, you’ll have to make advance tax funds.
Here’s a common system for calculating advance tax owed:
Advance tax owed = Estimated tax on complete earnings – TDS – Any reduction (comparable to below Part 87A). You should utilize the advance tax charges to calculate every instalment precisely. In case your quarterly earnings varies an excessive amount of, you possibly can recalculate your legal responsibility and regulate the following instalment.
The way to Pay Advance Tax On-line?
Comply with these steps to finish the advance cost of tax in earnings tax division’s on-line portal:
- Go to the official e-filing portal of the Earnings Tax Division.
- Navigate to the ‘e-Pay Tax’ choice. This selection could be discovered within the dropdown menu below Fast Hyperlinks, or alternatively, you may get to it via the search bar.
- Right here, you’ll have to enter your PAN or TAN particulars, alongside together with your cellular quantity. Press proceed after you’ve performed so.
- You’ll be prompted to enter the OTP you acquired. Enter it and press proceed.
- On the following web page, you’ll encounter a couple of choices. Choose the ‘Earnings Tax’ tab and proceed.
- Choose the relevant evaluation 12 months, and within the ‘kind of cost’ select ‘Advance Tax (100)’. Click on proceed to proceed.
- Fill within the tax particulars comparable to tax, surcharge, cess, curiosity, and others. As soon as performed, press proceed.
- On the following web page, you possibly can choose the mode of cost from choices like web banking, NEFT, RTGS, debit card and many others. Press proceed.
- You’ll be taken to a abstract web page the place you possibly can confirm the main points you’ve entered. Verify them totally and edit particulars if required. When you’ve verified the data, press ‘Pay Now’.
- When you efficiently full the cost, you’ll see an acknowledgement seem on the following display. Save a duplicate of this tax receipt, as you’ll have to enter the BSR code and challan quantity when submitting your tax return later.
Advance Tax Late Cost and Curiosity
Failure to adjust to advance tax guidelines can result in penalties below Sections 234B and 234C of the Earnings Tax Act.
Penalties below Part 234C: For delay in making advance tax funds
If a taxpayer fails to pay an advance tax instalment on time, curiosity is levied at 1% per thirty days. The curiosity is calculated from the due date of the missed instalment till the date of cost.
- 15% of complete tax legal responsibility by fifteenth June: 1% curiosity per thirty days for 3 months
- 45% by fifteenth September: 1% curiosity per thirty days for 3 months
- 75% by fifteenth December: 1% curiosity per thirty days for 3 months
- 100% by fifteenth March: 1% curiosity for 1 month
Penalties below Part 234B: For non-payment of advance tax
In line with advance tax provisions, taxpayers should pay not less than 90% of the full tax earlier than thirty first March of the monetary 12 months. If advance tax will not be paid or lower than 90% of the full legal responsibility is cleared by then, curiosity is charged at 1% per thirty days on the unpaid tax quantity.
Advance Tax Cost for Particular Instances
There are particular advance tax provisions in place for particular circumstances.
- Senior citizen exemption: People aged 60 and over should not required to pay advance tax except they earn earnings from a enterprise or career. They’ll merely file their earnings tax returns earlier than the standard deadline.
- Presumptive taxation scheme: As mentioned beforehand, taxpayers who’ve opted for the presumptive taxation scheme (Professionals below Part 44AD and companies below Part 44ADA) will pay advance tax in a single instalment earlier than fifteenth March.
- In case your TDS deducted in a monetary 12 months exceeds your anticipated tax legal responsibility, you don’t have to pay advance tax.
Conclusion
Advance tax is a type of earnings tax which is paid as one earns. If the tax legal responsibility exceeds Rs. 10,000 in a monetary 12 months (after deducting TDS and reduction), they’re required to pay advance tax in 4 instalments as per the due dates set by the Earnings Tax Division. There are particular advance tax provisions which permit taxpayers incomes skilled or enterprise earnings to go for the presumptive taxation scheme, below which they’ll pay the advance tax by the fifteenth or thirty first of March in a single instalment.
The earnings tax India advance tax guidelines below Sections 234C and 234B state that delay or non-payment of advance tax can result in penalties. Traders ought to accurately assess their tax legal responsibility for the 12 months and make changes each quarter to keep away from curiosity costs.