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Advance Tax–When & How To Pay?

As an individual we know about income tax, but you may not yet be aware about the implications of advance tax. Few of us ask, What is this advance tax? Is this an another type of tax imposed by the government? Do I have to pay this? These questions are very important to address as ignorance can add an unwanted liability on you. How? Lets understand the concept of advance tax:


ALSO READ : Step By Step Guide To Help You File Your Advance Tax Return Online In India

What Is Advance Tax?

As we all know income earned in the financial year i.e 1 April to 31 Mar is taxable in the assessment year. But do you know the amount of tax liability which becomes due in the assessment year needs to be paid during the financial year in defined installments compulsory.

The amount of tax liability (ranges from 0 to 90%) which needs to be paid in defined installment during the financial year is known as advance tax.

Why Advance Tax?

Rather than collecting the entire amount of tax at the end of financial year, government has introduced the rule of collection of total annual tax liability in installments throughout the financial year.

How All Are Liable To Pay Advance Tax In India?

According to the income tax act, if your total tax payable for the financial year is Rs 10,000 or more then you will be liable to pay advance tax.

Applicable to all assesses including salaried, self employed, pensioners, businessman’s etc.. If there estimated tax payable (after deduction of TDS/TCS) comes to Rs 10,000 or more for the financial year then you will have to file advance tax at defined intervals.

In case of salaried employees, employer deducts tax every month out from the monthly salary of the employees. So in most of the cases, salaried employees do not require to file advance tax. However, in case the tax liability estimated for the year is more than the TDS, then such employees shall be liable to pay advance tax. This can happen mostly in cases if you have income from other sources also like bank interest, income from house rent etc.

Advance Tax = Annual Tax Liability – Rebates – TDS/TCS (If Any)

What Are The Due Dates For The Payment Of Advance Tax For Individuals, Firms and Corporate Assessees?

Due Date For Payment Of Advance Tax For Individuals / Firms For Corporate Assessees
On Or Before 15th June Not applicable 15% of tax payable
On Or Before 15th September 30% of tax payable 30% of tax payable
On Or Before 15th December 30% of tax payable 30% of tax payable
On Or Before 15th March 40% of tax payable 25% of tax payable
On Or Before 31st March Tax On Capital Gains Or Casual Incomes Arising After 15th March (if any) Tax On Capital Gains Or Casual Incomes Arising After 15th March (if any)

How to Deposit Advance Tax In India?

Advance Tax can be deposited through Challan No 280 in the Reserve Bank Of India (RBI) or at any of  the authorized branches of nationalized banks. You can either take a printout of the form available online or can get the printed challan forms from the Income Tax Office free of cost. Now you can also deposit your advance tax online.

At the time of filling tax i.e. filing challan few fields are mandatory to be filed:-

  • Assessee’s Name
  • Complete Address of Assessee
  • Permanent Account Number
  • Assessment Year
  • Assessing Officer’s Ward or Circle
  • Amount of Advance Tax, Surcharge and Cess (if any).

Is There Any Scope Of Filing Revised Advance Tax?

Taxpayers are allowed to file revised advance tax after making payment of first installment. Assessees can also increase or decrease the subsequently payments to adjust the remaining installments.

Is There Any Penalty For Default/ Non Payment Of Advance Tax?

As mentioned above it is mandatory for assessee to file his/her advance tax. If an assessee do not file his advance tax on time or pays less than the stipulated percentage then he would be liable to pay simple interest at the rate of 1 % for every month on the defaulted amount until the tax due is fully paid.

What Will Happen If Assessee Files Excess Advance Tax During The Financial Year?

If an assessee pays more than the actual tax liability, then income tax department refunds the excess amount back to the assessee. Also an interest of 6% on the excess amount is paid, if, the excess amount is 10% more than the actual tax.

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