Advance Tax
Advance tax is a way of paying your income tax in installments throughout the year, rather than in a lump sum at the end of the financial year. This system is designed to help taxpayers manage their tax liability more effectively and ensure a steady flow of revenue to the government.
Advance tax is a tax payable by individuals on income sources beyond their regular salary, including earnings from rent, capital gains, lottery earnings, fixed deposits and more.
Who needs to pay Advance Tax?
You need to pay Advance Tax if your tax liability is more than Rs.10,000 after adjusting TDS
Salaried Individuals : If you have additional Income sources like Rent, Interest or Capital Gains . If you have more than one employer during the year and TDS has not been computed correctly.
Senior Citizens : People who are considered Senior Citizens (60 years or more) who DO NOT run a business are exempt from paying advance Tax.
Presumptive Income : Taxpayers who choose a presumptive tax regime under Section 44AD(Business) or 44ADA(Professionals such as Doctors, Lawyers, Consultants, Architects, CAs) are required to pay the advance tax liability on or before 15th March. However they can also pay their liabilities by the 31st March.
Advance Tax Due Dates
|
Instalment |
Due Date |
Tax Liability |
|
1st Instalment |
15th June of every year |
15% of the Assessed Tax |
|
2nd Instalment |
15th September of every year |
45% of the Assessed Tax |
|
3rd Instalment |
15th December of every year |
75% of the Assessed Tax |
|
4th Instalment |
15th March of every year |
100% of the Assessed Tax |
Consequences of Non-Payment of Advance Tax
Interest u/s 234B:
If you fail to pay advance tax or if the advance tax paid is less than 90% of the assessed tax, you will be liable to pay simple interest at 1% per month or part of a month on the shortfall from the first day of the assessment year until the date of determination of income or regular assessment.
Consequences of Short-Payment of Advance Tax
Interest u/s 234C:
If you delay paying the advance tax installments, you will incur interest at 1% per month for the period of delay on the amount of shortfall.
What if I overpay my Advance Tax?
f you overpay your advance tax, the excess amount will be refunded to you by the Income Tax Department. Here are the key points to consider:
Refund Process
- Filing Your Tax Return: When you file your income tax return for the financial year, you can claim the excess amount as a refund. The Income Tax Department will process your return and issue the refund accordingly.
- Interest on Refund: If the refund amount is more than 10% of the total tax paid, you may be eligible to receive interest on the refund amount. The interest is calculated at 0.5% per month or part of a month from April 1st of the assessment year until the date the refund is granted
How to make the payment of Advance Tax ?
You can make the advance tax payment through Challan 280 on Income Tax Portal.
