What is Advance Tax? How To Calculate & Make Advance Tax Payments Online?

What is Advance Tax?

Advance tax payment is done by those with other sources of income, along with their salary. This income includes rent, capital gains from shares, fixed deposits, lottery winnings, etc. Under this system, taxpayers pay a portion of their tax liabilities before the end of the financial year.

Advance tax payment is paid when the tax liability of any individual surpasses Rs.10000 in a given fiscal year. NRIs, whose tax liability in India surpasses Rs.10,000, are also obligated to pay advance tax payments. The best part is advance tax payments can be done in installments throughout, and paying it in a lump sum is unnecessary. Advance tax payments can be made online or through certain banks.

What are the advantages of Advance Tax payment?

• Tax collection process speeds up.
• Defaulting tax payments chances reduce.
• Increase in government funds as the government receives interest on the collected amount.
• Taxpayers need not worry about the shortage of money or tax payments at the last moment.

Who is liable to pay Advance Tax?

Every assessee whose estimated tax liability is Rs. 10,000/- or more after deducting TDS/TCS & MAT credit, then advance tax liability will arise.

Example

In the above case, since total estimated tax liability exceeds Rs. 10,000/- but estimated tax liability after deducting TDS is less than Rs. 10,000/- then he/she is not liable to pay any advance tax.

Who is not liable to pay Advance Tax?

There is an exception to the payment of Advance Tax in case following all conditions satisfies:

• Assessee is a senior citizen,
• He is a resident of India and
• He is not having any income from business or profession.

What is the due date of payment of Advance Tax?

You are required to pay the advance tax in installments instead of lump-sum. There are different due dates for paying the different installments over the year. Previously (upto FY 2015-16), the due dates & percentage of advance tax were different for corporate taxpayers and individual taxpayers. But afterwards, both categories of taxpayers have been brought at par.

The due dates of payment of advance tax for all assessee are given below:

For section 44AD/44ADA , they have to pay the whole of their advance tax liability in one installment on or before 15 March. They can also pay the entire amount by 31 March.

Please Note:- The last date to pay advance tax for the FY 2022-23 is 31st March 2023.

What is the Advance Tax payment due date for FY 2022-23?

The advance tax payment is generally made in the following manner: - 15% of tax liability should be paid byon June 15 or before. 45% of the tax liability is expected to be paid by September 15 or before, and at least 75% must be paid by December 15 or before. Moreover, the entire tax liability should be paid by March 15 of the financial yearor before.

The last date to pay the final installment of the advance tax for FY 2022-23 is 15th March, 2023. On this date 100% of advance tax liability has to be paid by taxpayers.

The advance tax payment due dates are given below:

How Advance Tax Liability is calculated?

It is also important to know that for calculating your advance tax liability, you have to only estimate your total income for the year.Do keep in mind the income you receive, the tax deducted at source and the investments you make. The tax is then calculated on this estimated total income.You don’t need to prove your projections to the Income Tax Department!

The steps are under:

• Estimate your total income from all sources earned from 1st April- 31st March of the financial year for which you are doing the advance tax calculations.
• Subtract all eligible deductions and exemptions
• Compute tax on such Income as per the tax regime opted by you.
• Reduce the amount of tax paid by way of TDS/TCS.

What you get is your advance tax liability (if the amount of tax calculated is more than Rs. 10000). Now you need to pay advance tax in installments as discussed in the previous section.

How to make the payment of Advance Tax online?

Now that you have calculated your advance tax liability, it's time to pay. You can pay advance tax online by following five simple steps-

• Login to https://www.protean-tinpan.com > Services > e-payment: Pay Taxes Online or click here.
• Select the relevant challan, i.e., ITNS 280.
• Enter PAN and other mandatory challan details like the address of the taxpayer and the bank through which payment is to be made etc. Select code 100 under “Type of Payment.”Select Assessment Year carefully.
• On submission, a confirmation screen will be displayed & you will be directed to the net-banking site of the bank.
• Login to the site with id/password provided by the bank and enter payment details. On successful payment, a challan counterfoil will be displayed containing challan number, BSR code, payment details, and bank name through which the e-payment has been made.

How will I verify the “Advance Tax Paid” to the Income Tax Department?

For this, after you make the payment, check whether the amount is reflected in your 26 AS. This can be done by log-in to your income tax department account on ITD website click on the option to view Form 26AS.

Normally, it takes 5-7 days to update on 26AS.

What is the due date of payment of Advance Tax for individuals opting for presumptive taxation scheme u/s 44AD/44ADA- Business and Profession income?

Taxpayers covered under the presumptive scheme are required to pay the whole of tax at once before 15th March. Thus, persons who are opting for 44AD or 44ADA need not to pay the advance tax in 4 installments i.e. need to pay in one installment only in the month of March [For FY 2022-23, due date is 15-03-2023]. They can also pay the entire amount by 31 March.

Do I need to pay Advance tax on Capital Gain Income, Winnings from lotteries, horse races, etc., dividends, and business or professional income accrue for the first time?

Assessee cannot estimate capital gain, winnings from lotteries, horse races, etc., business or professional income accrued for the first time, or dividend therefore advance tax on such income shall be paid in remaining installment by the assessee after receipt of such income. When no installment is due, pay by 31st March of the relevant financial year to avoid interest.

Let’s understand Advance Tax with the help of an example:

Let’s say, Mr. Gupta, aged 45 years, is a salaried person. The estimated tax liability of Mr. Gupta shall amount to Rs. 3,00,000. The amount deducted by way of TDS is Rs.2,00,000. In this case, Mr. Gupta is liable to pay advance tax as his tax liability is more than Rs. 10,000. Thus, he is required to pay the amount of advance tax.

What is the Penalty for Delayed Advance Tax Payment?

The advance tax payment should be made within the 4 deadlines i.e. June 15th, September 15th, December 15th, and March 15th of that financial year. If the tax is not paid on time, then interest is liable to be paid. This interest falls under two sections, Section 234C, and Section 234B.

Firstly, as per Section 234C, if the advance tax is not paid on time, then 1% per month interest is charged. This 1% interest charge is simple interest. The interest is calculated from the due date to the date of payment. Part of the month is considered as a full month.For instance-If, you were liable to pay Rs. 2 lakhs as advance tax by September 15, but you made the payment on December 15. Because of delayed payment, a 1% interest will be charged for four months.

Secondly, as per Section 234B. if 90% of the advance tax payment which is payable is not paid before the end of the financial year then 1% interest is applicable.

Ultimately, if you have delayed the payment or haven’t paid the 90% of the advance tax payment due, in both the cases you will be found as a defaulter.