Advance tax is also known as pay tax as you earn. It should be paid in advance during the financial year instead of a lump sum payment after the end of the year. You need to pay advance tax if your estimated total tax liability [after TDS] is Rs 10,000 or more in a financial year.
These payments have to be made in installments as per due dates provided by the income tax department.
Advance tax applies to all taxpayers irrespective of the profession, whether you are a salaried, freelancer, or businessman. However, Senior citizens who are 60 years or older and do not run a business are exempt from paying advance tax.
How to pay advance tax: https://tax2win.in/guide/online-income-tax-payment
Eligibility to Pay Advance Tax
It is mandatory for any individual, HUF, body of individuals, association of persons, or local authority that is liable to pay income tax and their tax liability exceeding 10,000 in a given fiscal year, to pay tax in advance.
The eligibility criteria for the payment of advance tax necessitate adherence to the subsequent conditions:
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The aggregate tax liability ought to transcend the threshold of ₹10,000.
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The taxpayer should either be a self-employed professional or an individual in the capacity of a salaried employee.
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Accrual of income from the fortuitous acquisition of lottery proceeds.
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Receipt of rental income derived from a residential property.
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Accrual of interest on fixed deposits.
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Realization of gains from equity investments or capital assets.
It is important to note that a senior citizen, classified as a resident, not engaged in any business or professional activity, is exempted from the obligation to remit advance tax.
Benefits of Advance Tax
No last-minute hassle: By adhering to the practice of advance tax payment, individuals can effectively reduce the risk of missing the deadline or encountering insufficient funds when making a lump sum tax payment. Additionally, this proactive approach ensures avoidance of the heightened stress associated with last-minute tax compliance, enabling taxpayers to conclude their tax obligations well ahead of others.
Easy Tax Collection Process: The adoption of advance tax payments by both individual and corporate taxpayers facilitates a smoother and more streamlined tax collection procedure. The systematic fulfillment of tax obligations in advance significantly reduces the complexities and potential obstacles in the overall tax collection process.
Enhanced Financial Management: Acknowledged as the 'pay as you earn' tax, the advance tax system ensures that taxes are remitted in tandem with earnings throughout the fiscal year, i.e., eliminating the need to defer payments until the year-end. Adopting this approach not only prevents the possibility of defaulting on tax payments but also aids in better financial management practices