To run the nation easily, the federal government wants a gradual circulation of income all year long. Since revenue tax is a significant supply of this income, counting on tax funds on the finish of the monetary yr can create gaps and issues for them. To deal with this, the federal government launched the advance tax cost system to make sure that people and companies pay taxes as they earn.
In keeping with this technique, these with tax legal responsibility above a sure threshold should pay advance tax in installments over the yr. This additionally helps taxpayers distribute a big burden on the finish of the yr as they will pay taxes in smaller, manageable quantities over time, similar to an EMI.
Understanding Advance Tax Funds
So, what’s advance tax? Merely put, it’s the tax you pay earlier than the monetary yr ends, as a substitute of ready till the top of the yr to clear all of your dues. It’s also often known as the ‘pay-as-you-earn’ scheme since you pay taxes in installments primarily based in your estimated revenue all year long.
In case your whole tax legal responsibility exceeds Rs. 10,000 in a monetary yr (after adjusting for TDS), you’re required to pay advance tax in 4 installments, on or earlier than fifteenth June, fifteenth September, fifteenth December, and fifteenth March. Since taxpayers may be penalised for inaccurate funds or delays, many individuals favor reaching out to a monetary marketing consultant for stress-free submitting.
Who Must Pay Advance Tax?
Any enterprise or particular person whose estimated tax legal responsibility in a given monetary yr exceeds Rs. 10,000 should pay advance tax. This contains:
1. Salaried people with revenue past wage
In case your major supply of revenue is wage, your employer already deducts TDS on the acceptable slab charges, which suggests you don’t want to make an advance revenue tax cost on wage. Chances are you’ll discover that this TDS provision does the precise factor as advance tax – it maintains a steady circulation of tax income for the federal government.
Nevertheless, if in case you have different sources of revenue, comparable to from hire, capital good points, curiosity from FDs, dividends, and lottery winnings, and the TDS deducted doesn’t cowl your whole tax legal responsibility, you should pay advance tax.
2. Freelancers and self-employed professionals
People incomes an expert revenue comparable to consultants, legal professionals, medical doctors, and writers, should estimate their annual earnings and pay advance tax in 4 installments. Because the acceptable TDS will not be deducted from such earnings, you’re accountable for fulfilling your tax obligations. For instance, your employer could solely deduct a ten% TDS in your freelance revenue. Nevertheless, in the event you fall beneath the 20% tax slab, you’ll nonetheless have to pay the remaining 10% as advance tax to keep away from curiosity or penalties. Speaking to a tax saving marketing consultant in such instances may be fairly useful.
Beneath Part 44ADA, professionals can go for the presumptive taxation scheme and pay their advance tax legal responsibility in a single installment earlier than thirty first March.
3. Companies
All companies are required to pay advance tax in 4 installments if their anticipated tax legal responsibility crosses Rs. 10,000 in a monetary yr. These choosing the presumptive taxation scheme beneath Part 44AD pays their whole advance tax in a single installment by thirty first March as a substitute of 4.
4. Non-residents
In case you are an NRI and earn an revenue from any taxable Indian sources like hire, FD curiosity, or capital good points exceeding Rs. 10,000 after TDS in a monetary yr, you should pay advance tax earlier than the advance tax due dates.
5. Exemptions
- Senior residents who don’t earn revenue from a enterprise or career are exempt from paying advance tax, even when their whole taxable revenue exceeds Rs. 10,000.
- If employers deduct enough TDS out of your wage and canopy your whole tax legal responsibility, you don’t want to pay advance tax individually.
- If the TDS deducted by banks, employers, mutual fund homes, and tenants from varied sources of revenue (wage, rental, fastened deposits, curiosity, and so on.) is enough to cowl your whole tax legal responsibility, you needn’t make an revenue tax advance tax cost.
Advance Tax Cost Dates and Due Dates
Given beneath are the advance tax cost dates established by the federal government. Lacking them can lead to penalties beneath Sections 234B and 234C of the Earnings Tax Act.
| Due Date | Tax Payable |
| On or earlier than fifteenth June (First installment) | At the very least 15% of whole tax legal responsibility |
| On or earlier than fifteenth September (Second installment) | At the very least 45% of whole tax legal responsibility |
| On or earlier than fifteenth December (Third installment) | At the very least 75% of whole tax legal responsibility |
| On or earlier than fifteenth March (Fourth installment) | 100% of tax legal responsibility |
People and firms who’ve opted for the presumptive taxation scheme can merely make their advance tax funds in a single installment by thirty first March. For the remaining, the federal government has set clear advance tax due dates, not like TDS cost final date, which is mostly the seventh of the next month.
Advance Tax Cost On-line
Funds may be made bodily at designated financial institution branches, however you too can conveniently make revenue tax advance tax funds on-line by means of the IT Division’s tax portal, by way of web banking, debit playing cards, and even UPI. In the event you’re questioning find out how to pay advance tax on-line, you’ll find the step-by-step walkthrough close to the top of this text!
Easy methods to Calculate Advance Tax
Calculating precisely how a lot advance tax is owed may be difficult because it requires you to make an affordable estimate of your earnings and tax legal responsibility for the yr. One could marvel find out how to pay advance tax so early in June when the complete yr’s revenue is unsure. Fortunately, since there are 4 installments, you can also make changes within the later quarters primarily based in your precise earnings.
In case your revenue will increase, you may pay the additional tax within the subsequent installment to keep away from penalties. However, in case your earnings are decrease than what you initially anticipated, your remaining funds may be decreased accordingly.
Right here’s how one can calculate advance tax:
1. Estimate how a lot you’ll earn within the monetary yr
To make an correct estimate of your tax legal responsibility, you must take into consideration each supply of your revenue. This contains wage, enterprise revenue, curiosity, dividends, rental revenue, skilled revenue, capital good points from investments, and another taxable revenue.
2. Previous regime concerns
In the event you plan on submitting your taxes beneath the outdated tax regime, subtract any deductions it’s possible you’ll be eligible for. Some examples are
- Part 80C deductions as much as Rs. 1.5 lakh per yr for investing in ULIPs, ELSS, PPF, SCSS, and extra.
- Part 80D deductions for funds in direction of medical insurance premiums for your self and your family members.
- Part 80E deductions on curiosity funds for training loans.
- Part 24(b) deductions on curiosity paid on residence loans.
Subtracting these deductions and exemptions ought to provide the gross taxable revenue on which you’ll calculate your tax legal responsibility for the yr.
3. Decide tax owed primarily based on revenue tax slabs
Use an revenue or advance tax calculator with the most recent slab charges to get a dependable estimate of tax owed. These calculators additionally account for cess and surcharge which may be simply missed when calculating manually. A wealth planner can assist you with this step and likewise information you to optimize your tax legal responsibility by benefiting from deductions, exemptions, and funding choices. They guarantee not solely that you just save as a lot tax as you legally can but in addition construct long-term wealth by means of personalised funding and tax plans.
4. Subtract tax deducted at supply
TDS already deducted, otherwise you anticipate will likely be deducted, may be subtracted to reach at your web tax legal responsibility. You can even subtract any eligible reduction like beneath Part 87A to find out the quantity of tax owed. If this determine is above Rs. 10,000, you should pay advance tax earlier than the desired due dates and if the TDS paid exceeds your anticipated tax legal responsibility, you needn’t pay any tax prematurely.
Easy methods to Calculate Advance Tax Funds – An Instance
Suppose Raj estimates his skilled revenue after subtracting TDS and deductions for the monetary yr can be Rs. 26 lakh. In keeping with the brand new regime, this revenue would fall within the highest tax slab, 30%. This implies, his whole tax legal responsibility (cess added) can be round Rs. 5 lakh. Assuming he hasn’t opted for the presumptive taxation scheme, right here’s how he could make his advance tax cost in 4 installments:
installment 1: Cost due on or earlier than fifteenth June
15% of Rs. 5 lakh = Rs. 75,000
installment 2: Cost due on or earlier than fifteenth September
45% of Rs. 5 lakh = Rs. 2,25,000. Since Raj already paid Rs. 75,000 within the first installment, he can subtract it from this one. So his second advance tax cost can be Rs. 2,25,000 – Rs. 75,000 = Rs. 1,50,000
installment 3: Cost due on or earlier than fifteenth December
75% of Rs. 5 lakh = Rs. 3,75,000. Similar to earlier than, we’ll subtract the primary and second installment quantities, which means his third cost can be Rs. Rs. 1,50,000. By fifteenth December, Raj can have cleared 3/4th of his tax legal responsibility.
installment 4: Cost due on or earlier than fifteenth March
Tax left = Rs. 5,00,000 – Rs. 3,75,000 = Rs. 1,25,000
With these 4 funds, Raj avoids a big lump sum burden on the finish of the monetary yr and the federal government can keep a gradual circulation of income all year long.
Advance Tax Slabs and Charges
The advance tax charges are:
- 15% by fifteenth June
- 45% by fifteenth September
- 75% by fifteenth December
- 100% by fifteenth March
Keep in mind this isn’t a separate tax. The advance tax proportion merely tells you the portion of your tax legal responsibility due earlier than a specified date. Your legal responsibility continues to be calculated primarily based on the outdated or new tax regime as there isn’t a separate advance tax slab.
Avoiding Penalties for Late Advance Tax Funds
You will need to observe if the due dates for making advance revenue tax funds are missed, the Earnings Tax Division imposes curiosity on the due quantity. In the event you miscalculate your anticipated revenue and pay much less tax than required by the primary due date, you may be charged a 1% curiosity per 30 days on the remaining quantity. This curiosity is utilized beneath Part 234B and Part 234C of the Earnings Tax Act.
The penalty may also apply in the event you miss the subsequent cost deadline. Failing to pay the third or last installment, will lead to a 1% easy curiosity being charged every month on the unpaid tax till the complete quantity is cleared. In the event you fail to pay no less than 90% of the whole tax earlier than thirty first March you’ll be charged 1% per 30 days on the quantity unpaid.
Step-by-Step Information to Paying Advance Tax On-line
One could make advance tax cost on-line by following these easy steps:
- Go to the Earnings Tax Division’s official e-filing portal.
- Search for the ‘e-Pay Tax’ possibility which may be discovered within the dropdown part beneath Fast Hyperlinks.
- You can even simply discover it by way of the search bar.
- You’ll be prompted to enter your PAN or TAN particulars and cell quantity. Enter them and press proceed. When you obtain the OTP, enter it and press proceed once more.
- On the brand new web page, click on on the ‘Earnings Tax’ tab and proceed.
- Select the evaluation yr. Within the ‘sort of cost’ field choose ‘Advance Tax (100)’ and click on on proceed to proceed.
- Right here you’ll have to fill in just a few particulars like tax, surcharge, cess, curiosity, and others. Fill them precisely and click on proceed.
- Select your most popular mode of cost from debit card, NEFT, RTGS, and web banking.
- You’ll lastly land on a abstract web page the place you may assessment your particulars. Confirm them and when you’re glad, press pay now.
- That’s it! The subsequent display ought to present you an acknowledgement containing the BSR code and challan quantity. It’s best to save a replica as you’re going to wish it later on the finish of the yr when submitting returns.
Conclusion
In case your tax legal responsibility exceeds Rs. 10,000 you should pay advance tax in installments all year long. In the event you estimate your gross taxable revenue after subtracting TDS and reduction exceeds this quantity, you can also make acceptable funds earlier than the deadlines specified by the federal government. Delays and non-payment of advance tax can lead to curiosity penalties.
Since an affordable estimate of your tax legal responsibility is essential, it is best to use a tax calculator 2024-25 up to date with the most recent revenue tax slab charges to find out it. You need to use our free on-line tax calculator to make sure accuracy. The beginning of the monetary yr is a good time to start tax planning because it offers you ample time to create tax-saving methods.
Because the monetary yr 2025-26 approaches, why not give our consultants an opportunity? Our funding planner will make sure you obtain personalised tax-saving recommendation on investments, insurance coverage, and loans. We additionally be sure you precisely and well timed file your returns and adjust to the most recent tax rules. Get in contact with our advisors immediately!