When taxpayers’ tax legal responsibility in a monetary yr exceeds a specific amount, they’re required to pay tax prematurely fairly than wait till the tip of the yr. This fee, made in 4 instalments, is called advance tax. On this weblog, we’ll reply what’s advance tax by understanding numerous advance tax guidelines and how one can file them on-line in simple steps.
What’s Advance Tax?
Let’s start with advance tax that means. Advance tax is a kind of earnings tax you pay beforehand over 4 instalments fairly than in lump sum after the tip of the monetary yr. Taxpayers should estimate their annual earnings and calculate their anticipated tax legal responsibility prematurely. If the full tax due (after TDS) comes out to be greater than Rs. 10,000, they need to pay a sure proportion as advance tax in 4 instalments – On or earlier than fifteenth June, fifteenth September, fifteenth December, and fifteenth March to keep away from curiosity penalties.
Chances are you’ll be questioning, why taxpayers must pay advance tax as a substitute of simply settling the total quantity whereas submitting their returns on the finish of the yr. The explanation for that is that the federal government desires to make sure they obtain a gentle move of tax income all year long, much like how salaried workers have TDS deducted month-to-month. For taxpayers who don’t have common TDS deductions, like self-employed people, freelancers, enterprise homeowners, and even salaried workers, the advance tax India construction makes certain taxes are paid repeatedly over the yr.
Who Ought to Pay Advance Tax?
Advance tax should be paid if one’s tax legal responsibility exceeds Rs. 10,000 in a monetary yr, minus the TDS (Tax Deducted at Supply) already deducted or anticipated to be deducted. So in case your whole tax legal responsibility after subtracting TDS continues to be greater than Rs. 10,000, it’s important to pay advance tax in instalments to keep away from curiosity penalties. The precise advance tax proportion relies on the due date introduced by the Revenue Tax Division.
Freelancers, companies and salaried people
If the annual tax legal responsibility is above Rs. 10,000 much less TDS, advance tax should be paid in 4 instalments. It’s because whereas salaried people obtain their salaries after relevant TDS deductions, freelancers and companies might not have common TDS on their earnings.
For instance, a freelancer falling within the 30% advance tax slab might have purchasers who deduct solely 10% TDS on funds. This creates a niche between the precise tax legal responsibility (30%) and the TDS deducted (10%), resulting in tax underpayment. Thus the freelancer is required to pay the remaining tax as advance tax to keep away from any penalties.
Professionals (Presumptive earnings)
Professions similar to attorneys, medical doctors, and consultants, that’s, these taxpayers who work independently and earn earnings and not using a mounted wage, are additionally required to estimate their annual earnings and pay advance tax if their whole tax legal responsibility after TDS goes over the Rs. 10,000 restrict.
Nonetheless, the advance tax slab for particular person professionals choosing the presumptive taxation scheme beneath Part 44ADA is a bit completely different. Such people don’t must pay their advance tax in 4 instalments. Fairly, they’ll pay their total tax legal responsibility in a single instalment by fifteenth March.
Companies beneath presumptive taxation scheme
If a enterprise has opted for the presumptive taxation scheme beneath Part 44AD, it’s required to pay advance tax if legal responsibility exceeds Rs. 10,000. In contrast to different companies, nevertheless, these beneath presumptive taxation are allowed to pay their total advance tax in a single single instalment by fifteenth March, as a substitute of 4 instalments.
NRIs
If an NRI’s whole tax legal responsibility in India (from any taxable Indian sources like capital positive aspects or rental earnings) exceeds Rs. 10,000 after TDS in a monetary yr, they need to pay advance tax.
Senior residents
Particular person taxpayers aged 60 years or above are exempt from paying any advance tax, no matter their whole tax legal responsibility. Nonetheless, senior residents who’ve a enterprise or skilled earnings, must pay advance tax if tax legal responsibility exceeds Rs. 10,000. This may be accomplished in 4 instalments, or 1 earlier than fifteenth March (beneath the presumptive taxation system).
Advance Tax Slabs and Charges
There isn’t a separate advance tax slab. Taxpayers must estimate their annual earnings and pay a proportion of their whole tax legal responsibility earlier than completely different deadlines all through the monetary yr. Thus, the advance tax charges are merely the identical because the common earnings tax slabs relevant to the taxpayer.
For instance, if the estimated taxable earnings of a person incomes enterprise earnings is Rs. 20 lakh (after subtracting TDS and deductions), they’d fall beneath the 30% tax bracket as per the earnings tax slabs. Let’s assume their tax legal responsibility for the yr beneath the brand new regime could be Rs. 3 lakh. This legal responsibility should be cleared in 4 instalments over the course of the monetary yr.
The advance tax fee schedule is:
- 15% of whole tax legal responsibility by fifteenth June
- 45% by fifteenth September
- 75% by fifteenth December
- 100% by fifteenth March
- First instalment: 15% of Rs. 3 lakh = Rs. 45,000. This fee is due by fifteenth June.
- Second instalment: 45% of Rs. 3 lakh = 1,35,000. However since Rs. 45,000 was already paid earlier, we’ll subtract it from this instalment. Thus the second advance tax fee by fifteenth September could be Rs. 90,000.
- Third instalment: 75% of Rs. 3 lakh = 2,25,000. Once more, for the reason that first and second instalments already coated Rs. 1,35,000, the fee for the third instalment due by fifteenth December could be Rs. 2,25,000 – Rs. 1,35,000 = Rs. 90,000.
- Fourth instalment: The taxpayer has already paid Rs. 2,25,000 by now, so the remaining tax legal responsibility, that’s, Rs. 3,00,000 – Rs. 2,25,000 = Rs. 75,000 could be paid within the final instalment.
Estimating one’s earnings and tax legal responsibility could be robust. It’s simple to make errors when making advance tax funds, which might result in curiosity penalties for underpayment or additional funds that might have been invested elsewhere. A tax guide will help people and companies optimise their tax financial savings. Their experience can assist you to declare all eligible deductions, keep compliance, file returns conveniently, and keep away from pointless curiosity or penalties.
Advance Tax Due Dates
Now that who ought to pay advance tax let’s perceive the deadlines to keep away from penalties. In response to advance tax guidelines, taxpayers (not beneath the presumptive taxation scheme) should pay their estimated tax legal responsibility in 4 instalments all through the monetary yr.
| Due Date (On or earlier than) | Advance Tax Share |
| fifteenth June | 15% of whole tax legal responsibility |
| fifteenth September | 45% of whole tax legal responsibility |
| fifteenth December | 75% of whole tax legal responsibility |
| fifteenth March | 100% of whole tax legal responsibility |
As we noticed within the instance above, the chances are cumulative, that means we will subtract the quantities already paid in earlier instalments from the full due. Additionally, those that have opted for the presumptive taxation scheme will pay their advance tax in a single instalment earlier than fifteenth March.
Failing to pay, or delaying advance tax funds can appeal to penalty curiosity beneath Sections 234B and 234C of the Revenue Tax Act. The curiosity levied on excellent tax owed can add up rapidly, which is why it’s vital to calculate and pay advance tax on time. With the assistance of our professional tax consulting companies, you’ll be able to precisely estimate your tax legal responsibility, plan your funds effectively, and keep away from any pointless curiosity penalties or compliance points.
How one can Calculate Advance Tax?
You may comply with these steps to calculate your advance tax legal responsibility:
- Estimate the full earnings for the monetary yr
This consists of all taxable earnings, like skilled, enterprise, rental, capital positive aspects, curiosity, dividend, wage, and so forth. For the reason that acceptable quantity of TDS is deducted from wage, salaried people ought to particularly concentrate on different sources of earnings to see if their tax legal responsibility exceeds Rs. 10,000 after TDS. They might want to pay advance tax on such earnings.
- Subtract any deductions
In case you are planning to file taxes beneath the outdated regime, chances are you’ll be eligible for a number of deductions on investments, mortgage repayments, insurance coverage premiums, and extra. Calculate these deductions and subtract them from whole earnings to get your taxable earnings.
- Calculate whole tax legal responsibility
The advance tax slab relies on your precise earnings tax slab. Use the most recent tax slab charges to calculate your tax legal responsibility for the yr. Don’t neglect to account for cess and any relevant surcharge.
- TDS excluding from whole tax legal responsibility
Now that you’ve got the full tax legal responsibility, you’ll be able to subtract the TDS already paid or anticipated together with any relevant aid (similar to Part 87A) to find out the advance tax owed. If this quantity exceeds Rs. 10,000, you’ll must make advance tax funds.
Here’s a basic formulation for calculating advance tax owed:
Advance tax owed = Estimated tax on whole earnings – TDS – Any aid (similar to beneath Part 87A). You need to use the advance tax charges to calculate every instalment precisely. In case your quarterly earnings varies an excessive amount of, you’ll be able to recalculate your legal responsibility and alter the subsequent instalment.
How one can Pay Advance Tax On-line?
Comply with these steps to finish the advance fee of tax in earnings tax division’s on-line portal:
- Go to the official e-filing portal of the Revenue Tax Division.
- Navigate to the ‘e-Pay Tax’ choice. This feature could be discovered within the dropdown menu beneath Fast Hyperlinks, or alternatively, you will get to it via the search bar.
- Right here, you’ll must enter your PAN or TAN particulars, alongside along with your cellular quantity. Press proceed after you’ve accomplished so.
- You’ll be prompted to enter the OTP you acquired. Enter it and press proceed.
- On the subsequent web page, you’ll encounter a couple of choices. Choose the ‘Revenue Tax’ tab and proceed.
- Choose the relevant evaluation yr, and within the ‘kind of fee’ select ‘Advance Tax (100)’. Click on proceed to proceed.
- Fill within the tax particulars similar to tax, surcharge, cess, curiosity, and others. As soon as accomplished, press proceed.
- On the subsequent web page, you’ll be able to choose the mode of fee from choices like internet banking, NEFT, RTGS, debit card and so forth. Press proceed.
- You’ll be taken to a abstract web page the place you’ll be able to confirm the small print you’ve entered. Verify them completely and edit particulars if required. When you’ve verified the data, press ‘Pay Now’.
- When you efficiently full the fee, you’ll see an acknowledgement seem on the subsequent display screen. Save a duplicate of this tax receipt, as you’ll must enter the BSR code and challan quantity when submitting your tax return later.
Advance Tax Late Cost and Curiosity
Failure to adjust to advance tax guidelines can result in penalties beneath Sections 234B and 234C of the Revenue Tax Act.
Penalties beneath Part 234C: For delay in making advance tax funds
If a taxpayer fails to pay an advance tax instalment on time, curiosity is levied at 1% monthly. The curiosity is calculated from the due date of the missed instalment till the date of fee.
- 15% of whole tax legal responsibility by fifteenth June: 1% curiosity monthly for 3 months
- 45% by fifteenth September: 1% curiosity monthly for 3 months
- 75% by fifteenth December: 1% curiosity monthly for 3 months
- 100% by fifteenth March: 1% curiosity for 1 month
Penalties beneath Part 234B: For non-payment of advance tax
In response to advance tax provisions, taxpayers should pay at the very least 90% of the full tax earlier than thirty first March of the monetary yr. If advance tax isn’t paid or lower than 90% of the full legal responsibility is cleared by then, curiosity is charged at 1% monthly on the unpaid tax quantity.
Advance Tax Cost for Particular Circumstances
There are particular advance tax provisions in place for particular circumstances.
- Senior citizen exemption: People aged 60 and over should not required to pay advance tax except they earn earnings from a enterprise or occupation. They will merely file their earnings tax returns earlier than the standard deadline.
- Presumptive taxation scheme: As mentioned beforehand, taxpayers who’ve opted for the presumptive taxation scheme (Professionals beneath Part 44AD and companies beneath Part 44ADA) will pay advance tax in a single instalment earlier than fifteenth March.
- In case your TDS deducted in a monetary yr exceeds your anticipated tax legal responsibility, you don’t must pay advance tax.
Conclusion
Advance tax is a form of earnings tax which is paid as one earns. If the tax legal responsibility exceeds Rs. 10,000 in a monetary yr (after deducting TDS and aid), they’re required to pay advance tax in 4 instalments as per the due dates set by the Revenue Tax Division. There are particular advance tax provisions which permit taxpayers incomes skilled or enterprise earnings to go for the presumptive taxation scheme, beneath which they’ll pay the advance tax by the fifteenth or thirty first of March in a single instalment.
The earnings tax India advance tax guidelines beneath Sections 234C and 234B state that delay or non-payment of advance tax can result in penalties. Traders ought to appropriately assess their tax legal responsibility for the yr and make changes each quarter to keep away from curiosity expenses.
