Advance Tax Payment - Due Date, Calculation & How to Pay Advance Tax Online?

What is Advance Tax?

Advance tax, also known as "pay as you earn" tax, is a system where taxpayers make prepayments of their income tax throughout the financial year, instead of paying a lump sum at year-end. It is mandated when the anticipated tax liability for the year exceeds a certain threshold, typically specified in tax regulations. This ensures a steady flow of revenue for the government and helps taxpayers manage their tax obligations effectively.

Individuals with an estimated tax liability exceeding Rs. 10,000 in a financial year are generally required to pay advance tax. However, there's an exception to this rule. If you're a senior citizen aged above 60 and don't have any business income, you are exempt from paying advance tax.

What are the advantages of Advance Tax payment?

• Tax collection process speeds up.
• Defaulting tax payments chances are reduced.
• 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 or at the time of filing Income Tax return.

Who is liable to pay Advance Tax?

Advance tax is typically required to be paid by individuals and entities with significant tax liabilities. Here are the key categories of taxpayers who should pay advance tax:

• Individuals (including salaried employees): If your total tax liability after accounting for TDS (Tax Deducted at Source) is expected to be Rs. 10,000 or more for the financial year, you are required to pay advance tax.
• Self-Employed and Professionals: Individuals earning income through business, freelancing, consultancy, or any profession are also liable to pay advance tax if their estimated tax liability exceeds Rs. 10,000 for the financial year.
• Corporate Entities: All companies, including public and private limited companies, are required to pay advance tax. The due dates and percentages may vary based on the company's size, revenue, and profit.
• Partnership Firms and LLPs: Partnership firms and Limited Liability Partnerships (LLPs) should also pay advance tax if their estimated tax liability exceeds Rs. 10,000 for the financial year.
• Non-Resident Taxpayers: Non-resident individuals and foreign companies earning income in India are subject to advance tax requirements if their tax liability crosses the Rs. 10,000 threshold.
• Capital Gains: Individuals earning capital gains from the sale of assets such as real estate, stocks, or other investments may need to pay advance tax if their estimated capital gains tax liability is Rs. 10,000 or more.
• Businesses with Specified Incomes: Some businesses, such as lottery and horse racing, are required to pay advance tax on specified incomes irrespective of the Rs. 10,000 threshold.

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?

While many taxpayers are required to pay advance tax, there are specific groups of individuals and entities who are not liable to pay advance tax. These include:

• Senior Citizens: Individuals who are senior citizens, typically aged 60 years or older, and do not have income from business or profession are exempt from paying advance tax. However, if they have business or professional income, they are not exempt and must pay advance tax.
• Resident Individuals and HUFs (Hindu Undivided Families): If a resident individual or Hindu Undivided Family (HUF) does not have business or professional income, and their tax liability after considering TDS (Tax Deducted at Source) is less than Rs. 10,000 for the financial year, they are not required to pay advance tax.
• Taxpayers with Exclusively Salary Income: Individuals who earn only salary income and do not have any other sources of income are generally not liable to pay advance tax. Their tax liability is usually met through TDS by their employers.

Advance Tax Due Dates For FY 2023-24

Until the financial year 2015-16, there were different due dates and percentages for paying advance tax based on whether you were a corporate taxpayer or an individual taxpayer. However, starting from the financial year 2016-17, both corporate and individual taxpayers have been treated equally when it comes to the due dates and the percentages of advance tax they need to pay. This change brought both categories of taxpayers in line with the same rules and requirements for paying advance tax.

Due date of payment of Advance Tax for both individual and corporate taxpayers

Due date of payment of Advance Tax for individuals opting for presumptive taxation scheme u/s 44AD/44ADA - Business and Profession income

How Advance Tax Liability is calculated?

It is also important to know that for calculating your advance tax liability, you have only to 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 pay 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 seven simple steps-

• Step - 1 To pay advance tax click on the link https://www.incometax.gov.in/iec/foportal/.
  After clicking on the link the following page will appear. Click on E PAY tax on the left side-
• Step- 2 After clicking on E-Pay tax, the following page will appear. On this page fill in the details like PAN and Mobile No. On the mobile no entered you will get OTP.
• Step-3 After entering the OTP, the following page will appear. On the page under the income tax head click on proceed.
• Step- 4 After clicking on proceed, the following page will appear. On this page select AY for which you want to pay advance tax and select the type of payment as advance tax from various options.
• Step -5 After selecting the type of payment, click on continue and feed the amount of tax to be paid in the tax category. After feeding the amount click on continue-
• Step - 6 After clicking on continue, various payment methods will be appearing for payment of advance tax. Select the payment method as per your convenience.
• Step-7 After selecting the payment method, click on continue and make payment. After making payment, you will get a document as challan for your reference and ITR Filing.

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 AIS. This can be done by logging into your income tax department account on the ITD website and clicking on the option to view AIS

What is Advance Tax Late Payment Interest?

The advance tax payment should be done 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.

• Failure to Pay Advance Tax Incurs Interest (Section 234B): According to Section 234B, it's essential to pay a minimum of 90% of your total tax liability as advance tax by March 31st. Neglecting advance tax payments results in an interest charge of 1% on the unpaidamount.
• Delayed Advance Tax Payment Attracts Interest (Section 234C): When advance tax payments are delayed, Section 234C comes into play, imposing interest charges as follows:
  • If the advance tax paid by June 15th is less than 15% of the total tax liability, a monthly interest rate of 1% applies for three months. This is calculated based on 15% of the total tax liability minus any tax paid before June 15th.
  • If the advance tax paid by September 15th is less than 45% of the total tax liability, the same 1% monthly interest rate applies for three months. This calculation is based on 45% of the total tax liability minus any tax paid before September 15th.
  • If the advance tax paid by December 15th is less than 75% of the total tax liability, the interest rate remains 1% per month for three months. This is determined by calculating 75% of the total tax liability minus any tax paid before December 15th.
  • Lastly, if the advance tax paid by March 15th is less than 100% of the total tax liability, a 1% monthly interest rate applies for one month. This calculation is based on 100% of the total tax liability minus any tax paid before March 15th.

Example for Advance Tax Calculation

Preeti is working in a company and also working as a freelancer. Her earnings from her salary is 10 lakh rupees before providing benefit of any deductions or exemption. Her net receipts (after providing benefit of expenses) from her freelancing work are around Rs.10 lakh. She is investing 1.5 lakh rupees in PPF and paying 25000 as her medical insurance. She is also getting 15000 as interest on her fixed deposits.Her employer has deducted TDS of Rs. 100000 for her salary income. So her final calculation and advance tax liability is as follows -

Latest Update:- The Income Tax Department has released the Advance Tax Calculator for the Financial Year 2023-24, in accordance with the amendments made up to the Finance Act of 2023. This powerful tool is designed to assist you in estimating the amount of advance tax you need to pay throughout the financial year. It factors in your income, deductions, and exemptions to provide you with a precise estimate.

Are you looking for assistance with advance tax payment and its calculation, talk to our tax experts today.
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