When taxpayers’ tax legal responsibility in a monetary yr exceeds a certain quantity, they’re required to pay tax upfront somewhat than wait till the top of the yr. This cost, made in 4 instalments, is named advance tax. On this weblog, we’ll reply what’s advance tax by understanding numerous advance tax guidelines and how one can file them on-line in straightforward steps.
What’s Advance Tax?
Let’s start with advance tax that means. Advance tax is a sort of revenue tax you pay beforehand over 4 instalments somewhat than in lump sum after the top of the monetary yr. Taxpayers should estimate their annual revenue and calculate their anticipated tax legal responsibility upfront. If the whole tax due (after TDS) comes out to be greater than Rs. 10,000, they have to pay a sure share 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 could 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 yr. The rationale for that is that the federal government needs to make sure they obtain a gentle circulate 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 certain taxes are paid frequently over the yr.
Who Ought to Pay Advance Tax?
Advance tax should be paid if one’s tax legal responsibility exceeds Rs. 10,000 in a monetary yr, 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 continues 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 share is dependent upon the due date introduced by the Revenue 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’s because whereas salaried people obtain their salaries after relevant TDS deductions, freelancers and companies might not have common TDS on their revenue.
For instance, a freelancer falling within the 30% advance tax slab might have purchasers who deduct solely 10% TDS on funds. This creates a niche 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 revenue)
Professions reminiscent of legal professionals, docs, and consultants, that’s, these taxpayers who work independently and earn revenue with out a mounted wage, are additionally required to estimate their annual revenue and pay advance tax if their complete tax legal responsibility after TDS goes over the Rs. 10,000 restrict.
Nonetheless, 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. Reasonably, they will 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. Not like different companies, nevertheless, 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 positive aspects or rental revenue) exceeds Rs. 10,000 after TDS in a monetary yr, 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. Nonetheless, senior residents who’ve a enterprise or skilled revenue, have to pay advance tax if tax legal responsibility exceeds Rs. 10,000. This may be executed 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 revenue and pay a share of their complete tax legal responsibility earlier than totally different deadlines all through the monetary yr. Thus, the advance tax charges are merely the identical because the common revenue tax slabs relevant to the taxpayer.
For instance, if the estimated taxable revenue of a person incomes enterprise revenue is Rs. 20 lakh (after subtracting TDS and deductions), they’d fall below the 30% tax bracket as per the revenue tax slabs. Let’s assume their tax legal responsibility for the yr 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 yr.
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 revenue and tax legal responsibility may be powerful. It’s straightforward to make errors when making advance tax funds, which may result in curiosity penalties for underpayment or additional funds that would have been invested elsewhere. A tax advisor may also help people and companies optimise their tax financial savings. Their experience can will let 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 recognize 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 yr.
| Due Date (On or earlier than) | Advance Tax Proportion |
| 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, that means we will subtract the quantities already paid in earlier instalments from the whole 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 entice penalty curiosity below Sections 234B and 234C of the Revenue Tax Act. The curiosity levied on excellent tax owed can add up rapidly, which is why it’s necessary to calculate and pay advance tax on time. With the assistance of our skilled tax consulting companies, you may precisely estimate your tax legal responsibility, plan your funds effectively, and keep away from any pointless curiosity penalties or compliance points.
Tips on how to Calculate Advance Tax?
You may observe these steps to calculate your advance tax legal responsibility:
- Estimate the whole revenue for the monetary yr
This consists of all taxable revenue, like skilled, enterprise, rental, capital positive aspects, 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 revenue to see if their tax legal responsibility exceeds Rs. 10,000 after TDS. They might want to pay advance tax on such revenue.
- Subtract any deductions
If you’re planning to file taxes below the outdated 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 revenue to get your taxable revenue.
- Calculate complete tax legal responsibility
The advance tax slab is dependent upon your precise revenue tax slab. Use the most recent tax slab charges to calculate your tax legal responsibility for the yr. Don’t neglect to account for cess and any relevant surcharge.
- TDS excluding from complete tax legal responsibility
Now that you’ve the whole tax legal responsibility, you may subtract the TDS already paid or anticipated together with any relevant aid (reminiscent of 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 normal system for calculating advance tax owed:
Advance tax owed = Estimated tax on complete revenue – TDS – Any aid (reminiscent of below Part 87A). You need to use the advance tax charges to calculate every instalment precisely. In case your quarterly revenue varies an excessive amount of, you may recalculate your legal responsibility and regulate the following instalment.
Tips on how to Pay Advance Tax On-line?
Comply with these steps to finish the advance cost of tax in revenue tax division’s on-line portal:
- Go to the official e-filing portal of the Revenue Tax Division.
- Navigate to the ‘e-Pay Tax’ possibility. This feature may 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 along with your cell quantity. Press proceed after you’ve executed so.
- You’ll be prompted to enter the OTP you obtained. Enter it and press proceed.
- On the following web page, you’ll encounter a number of choices. Choose the ‘Revenue Tax’ tab and proceed.
- Choose the relevant evaluation yr, and within the ‘kind of cost’ select ‘Advance Tax (100)’. Click on proceed to proceed.
- Fill within the tax particulars reminiscent of tax, surcharge, cess, curiosity, and others. As soon as executed, press proceed.
- On the following web page, you may choose the mode of cost from choices like internet banking, NEFT, RTGS, debit card and many others. Press proceed.
- You’ll be taken to a abstract web page the place you may confirm the small print you’ve entered. Verify them completely and edit particulars if required. When you’ve verified the knowledge, press ‘Pay Now’.
- When you efficiently full the cost, you’ll see an acknowledgement seem on the following display. Save a replica 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 Fee and Curiosity
Failure to adjust to advance tax guidelines can result in penalties below Sections 234B and 234C of the Revenue 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% monthly. 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 monthly for 3 months
- 45% by fifteenth September: 1% curiosity monthly for 3 months
- 75% by fifteenth December: 1% curiosity monthly 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 at the least 90% of the whole tax earlier than thirty first March of the monetary yr. If advance tax is just not paid or lower than 90% of the whole legal responsibility is cleared by then, curiosity is charged at 1% monthly on the unpaid tax quantity.
Advance Tax Fee for Particular Circumstances
There are particular advance tax provisions in place for particular circumstances.
- Senior citizen exemption: People aged 60 and over will not be required to pay advance tax until they earn revenue from a enterprise or occupation. They’ll merely file their revenue tax returns earlier than the same old 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 yr exceeds your anticipated tax legal responsibility, you don’t have to pay advance tax.
Conclusion
Advance tax is a sort of revenue tax which is paid as one earns. If the tax legal responsibility exceeds Rs. 10,000 in a monetary yr (after deducting TDS and aid), they’re required to pay advance tax in 4 instalments as per the due dates set by the Revenue Tax Division. There are particular advance tax provisions which permit taxpayers incomes skilled or enterprise revenue to go for the presumptive taxation scheme, below which they will pay the advance tax by the fifteenth or thirty first of March in a single instalment.
The revenue tax India advance tax guidelines below Sections 234C and 234B state that delay or non-payment of advance tax can result in penalties. Buyers ought to appropriately assess their tax legal responsibility for the yr and make changes each quarter to keep away from curiosity expenses.