Advance Tax Payment

The payment of income tax is required to be made on an estimated basis during the financial year itself. The legal provisions of payment of the advance tax are mandatory in case the tax payable is more than Rs. 10,000/- in a financial year. Non Payment of Advance tax may impose additional Interest on Income Tax at the time of Income Tax Return Filing.

Who is Liable to Pay?

The eligibility criteria you will have to fulfill in order to pay advance tax are:

• Tax liability should be Rs.10,000 and above.
• Salaried individuals (if TDS is insufficient)
• Self-employed professionals and businessmen.
• Income from capital gains on shares.
• Interest earned on fixed deposits.
• Rent or income earned from house property.

Due Dates & Installment Schedule

Listed below is the mandatory advance tax schedule for self-employed individuals, businessmen, and corporate assessees:

Note: Any tax paid till 31st March will be considered as Advance Tax payment.

Late Payment & Interest Penalties

If the advance tax paid by you is less than 90% of the assessed tax, then you will be charged an interest of 1% every month under Section 234B of the Income Tax Act. The interest is computed as 1% on the defaulted amount for every month until the tax is paid off completely.

Additionally, under Section 234C of the Income Tax Act, if you do not pay your advance tax installment on time (e.g. missing the 15% mark by June), then you will be charged an interest rate of 1% on the shortfall.

Exemptions

• Senior Citizens: Aged 60 years and above are exempted from paying advance tax, provided they do not have income from a business or profession.
• Salaried Individuals: Falling securely under the TDS net are exempted. However, any massive earnings from sources such as capital gains, rent, and non-salary income will attract advance tax.
• High TDS Deductions: If the TDS already deducted at source is more than the total tax payable for the year, you do not have to pay advance tax.

Benefits of Paying Advance Tax

Advance tax helps in reducing the stress of taxpayers. By paying tax in advance, taxpayers do not have to worry about cash crunches or massive lump-sum tax payments at the last moment. It also speeds up the government's tax collection process and allows businesses to better manage their finances by aligning tax outflows with income generation.