Advance Tax Payment Guide: Due Dates, Calculation & Online Payment

What is Advance Tax?

Advance tax is the income tax paid in advance for the income earned in a particular year. This tax is payable by individuals with income sources beyond their regular salary, like capital gains, rent, fixed deposit, and more.

It is also known as "pay as you earn" tax, 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 ( exceeding Rs. 10,000 in a financial year), typically specified in tax regulations. This ensures a steady flow of revenue for the government and helps taxpayers manage their tax obligations effectively.

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 making advance tax payments.

In case the tax is not paid on time, the penalty will be charged under sections 234B and 234C of income tax.

Who is liable to pay Advance Tax?

Advance tax is typically required to be paid by individuals and entities. with an estimated tax liability of ₹ 10,000 or more in a financial year. 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.
• Senior Citizens Senior citizens who have earned a business income in a financial year must pay advance tax.

For Example:

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

Don't wait until the advance tax due date looms – secure your financial future today with timely advance tax payments. Pay the advance tax dues today.

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:

• Tax Relief for Senior Citizens:
  Individuals aged 60 years or above, without income from business or profession, are exempt from paying advance tax.
• Income below Taxable Limit:
  Taxpayers with total income not exceeding the taxable limit are not required to pay advance tax.
• Presumptive Taxation Scheme for Businesses:
  Small businesses with an annual turnover of up to Rs. 2 crores can opt for the presumptive taxation scheme and are exempt from advance tax.
• Farmers and Agriculturists:
  Income from agricultural activities is not considered for advance tax calculation, providing relief to farmers and agriculturists.
• Commission or Brokerage Income:
  Individuals earning income through commission or brokerage are exempt from paying advance tax on such earnings.
• Income Covered under Section 44ADA:
  Professionals with specified income covered under Section 44ADA, such as certain professionals in the fields of medicine, law, engineering, etc., are exempt from advance tax.
• Individuals with Business Income under Presumptive Taxation:
  Individuals having business income covered under presumptive taxation provisions are not required to pay advance tax separately on such income.
• Capital Gains:
  Taxpayers with income from capital gains are exempt from paying advance tax if they choose to pay the entire tax liability at the time of e filing income tax return.
• Salary Income:
  Salaried individuals are generally not required to pay advance tax as their employers deduct tax at source (TDS) from their salary.
• Dividend Income:
  Individuals receiving dividend income are not subject to advance tax on such earnings.

Advance Tax Payment Schedule for FY 2024-25

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.

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

Due date of advance tax payment for individuals opted for presumptive taxation scheme u/s 44AD/44ADA - Business and Profession income

Note:- While March 15, 2025 is the last date to pay complete advance income tax for FY 2024-25 but you can still pay the last quarter’s due advance tax by 31st March 2025. This payment will attract interest under Section 234C. However, despite this interest amount you will end up paying less than what you would pay after 31 March. In case you do not pay the last quarter’s advance tax by March 31, 2025 then additional interest under Section 234B will also be levied from April 1, 2025.

Advance tax Calculation

To calculate advance tax online, follow these steps:-

• 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 you opted for.
• 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 below:-

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

Want a CA to calculate and help pay your advance tax dues? Contact Tax Experts

Example for Advance Tax Calculation

Preeti works for a company and as a freelancer. Her earnings from her salary are 10 lakh rupees before providing the benefit of any deductions or exemptions. Her net receipts (after providing the 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 from her salary income. So, her final calculation and advance tax liability are as follows -

How to pay Advance Tax Online?

Now that you have calculated your advance tax liability, it's time to pay. You can make advance tax payments 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 appear for payment of advance tax. Select the payment method at your convenience.
  
• Step-7 After selecting the payment method, click on continue and make payment. After making payment, you will get a document as a challan for your reference and ITR Filing.

If want to pay the tax offline, download Challan 280 form from the Income tax department website, fill it and submit it at the bank.

Tax Refund Process for Overpaid Advance Tax

If the tax you have paid in advance on the basis of self-assessment is more than the tax payable on the basis of regular assessment, you are eligible to claim an income tax refund. Sections 237 to 245 deal with the provisions relating to refund of tax. To claim your income tax refund, you need to file a correct income tax return before the due date (i.e.,31st July). While filing your return ,you can check the total advance tax payments under Form 26AS.

What will happen if you miss advance tax deadline?

The advance tax payment should be made within the four deadlines, i.e., June 15th, September 15th, December 15th, and March 15th of that financial year. You must pay at least 90% of the total taxes as advance tax by 31st March of the relevant assessment year. Failure to make advance tax payments will result in an interest. 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 unpaid amount.
• 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.

Note: Changing jobs? Be cautious! Employers often miscalculate TDS, leading to advance tax liability. If not paid on time, you may face late fees and interest on the unpaid amount, significantly increasing your tax burden. Stay proactive—review your tax liability and deposit advance tax on time to avoid unnecessary penalties.

Mode of payment of advance tax

As per Rule 125 of the Income-tax Rules, 1962 a corporate taxpayer (i.e., a company) shall pay taxes through the electronic payment mode using the internet banking facility of the authorised banks. Taxpayers other than a company, who are required to get their accounts audited, shall pay taxes through the electronic payment mode using the internet banking facility of the authorised banks. Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. by depositing the challan at the receiving bank. Read More

Benefits of Paying Advance Tax

• The tax collection process speeds up.
• Defaulting tax payment, chances are reduced.
• Increase in government funds as the government receives interest on the collected amount.
• From the government's perspective, it provides a continuous flow of income throughout the year.
• Taxpayers need not worry about the shortage of money or tax payments at the last moment or at the time of ITR e filing.

Refund in Advance Tax Payment

Advance tax refers to paying a portion of your taxes before the end of the financial year. This is typically done in installments throughout the year, based on estimated income, to avoid a large tax liability at the end of the year. If you've paid more in advance tax than what you actually owe at the end of the financial year, you may be eligible for a refund. Taxpayers can claim a refund by filling out and submitting Form 30. They have to make the claim within a period of one year from the last year of the assessment year.

Which forms are required in Advance Tax?

To ensure compliance with tax regulations, it's crucial to properly fill out and submit Form Challan No. ITNS 280 on or before the deadlines. This form has specific preconditions that need to be met:

• PAN Details: It's imperative to provide accurate PAN (Permanent Account Number) details to avoid any misallocation of tax payments. Using incorrect PAN details may result in the tax being credited to someone else's account.
• Assessment Year: Selecting the correct assessment year is essential as the tax being paid is typically for the upcoming financial year. Ensure that you choose the appropriate assessment year to align with your tax liability.
• Choosing a Payment Type: In the form, taxpayers must select the payment type based on the nature of the tax being paid:
  • Advance Tax: If the tax is being paid for the same fiscal year based on estimated income.
  • Self-Assessment Tax: If the tax is being paid after the end of the financial year to regularize the tax liability.
• Challan Identification Number (CIN): Upon successful payment, a Challan Identification Number (CIN) will be generated. It's essential to record this number and use it when filing your income tax return. Additionally, ensure that the Income Tax Department has received the online payment made through ITNS 280 by verifying the transaction status.

If you miss advance tax payments or delay them, there is penal interest on the taxes due, under section 234C, at the rate of 1 percent per month/part of the month. Don’t Delay, Pay your Advance Tax Today.