What is Advance Tax and Who Should Pay it?

As the name suggests, Advance tax is the income tax that is paid in advance and this is the tax that is paid as you earn. This is the tax that is paid in installments rather than the lumpsum amount which we pay while filing normal ITR.?

Who is Liable to Pay Advance Tax?

Taxpayers may be earning from business, freelancing or other sources, have a tax liability of more than ?10,000 in a financial year and have sources of income other than salary and include income that is earned from shares, interest earned on fixed deposits or bank deposits, rent or income received from house property, winnings from lottery.?

However, senior citizens above the age of 60, who are not earning from business or profession are excluded from paying taxes.?

How and When is Advance Tax paid?

As discussed earlier advance tax is required to be paid in installments and that too according to the schedule and the due dates that are required to be followed, as given below:

How to Calculate Advance Tax Liability?

• Calculate or estimate your total income earned between 1st April to 31st March from all income heads, essentially from Income from any interest earned from FDs, savings accounts, capital gains, professional income, income from house property, or any other income.
• Subtract all the expenses and investments which are allowed under various exemptions and deductions.
• Calculate tax on this income.
• Now, according to the TDS slab, deduct TDS, and if after deducting TDS your tax liability exceeds? ?10,000, then pay advance tax.

Penalties For Paying Advance Tax After Due Dates

Penalties are applicable under section 234B and section 234C, if an individual has failed to pay advance tax or if the paid advance tax is less than 90% of the assessed tax.?

Under section 234B, 1% simple interest is applicable per month on the amount of the unpaid tax.?

Penalties are applicable under section 234C if the advance tax paid in any installments is less than the prescribed percentage of the installment amount as follows:

Frequently Asked Questions

1. Can I claim deductions under section 80C while calculating the advance tax?

Yes, deductions can be claimed u/s 80C for calculating advance tax.

2. Does an NRI need to pay advance tax?

Yes, NRIs are also liable to pay advance tax if their income in India is more than ?10,000.

3. How is Advance Tax payment made?

Advance tax payment is made using challan 280, just like the normal ITR filing.

4. What if I pay advance tax more than I am liable to pay in a financial year?

In case you paid excess advance tax, then you will get a refund with 6% of interest per annum on the excess amount if the excess amount is more than 10% of your tax liability.?