What is Advance Tax?
Advance Tax is part payment of one’s tax liability before the end of the fiscal year i.e. 31st March. The provisions of the Income Tax Act make it obligatory for every individual, salaried/ self-employed professional, businessman and corporate to pay Advance Tax, on any income on which TDS is not paid.
Do I need to Pay Advance Tax?
An individual is liable to pay advance tax if he has income from interest, commission, rent, business or profession, etc, on which no tax has been deducted at source (or tax has been deducted at a lower rate). Advance tax liability arises where the balance tax liability is R10,000/- or more. If you are salaried person with only salary as the sole source of income, Advance Tax would not be applicable as tax deducted at source would be taken care of by your employer. If you have other sources of income, such as, income from capital gains, shares and mutual funds, income from house property, etc Advance Tax is mandatory.
How to Calculate Advance Tax
While calculating Advance Tax payable, taxpayer needs to make only a projection or estimate of his income, as the actual income could be calculated only by the fiscal year end.
- Using the projected income for the fiscal year, the tax payable is to be calculated as per the tax slabs applicable for the current financial year.
- From the tax so computed, subtract the tax deducted at source, if any.
- Include educational cess while calculating advance tax.
- The amount arrived at is the advance tax payable, in instalments.
When do I have to pay Advance Tax?
For Non-Corporate Assessee- Individuals
- On or before 15 September - not less than 30% of tax payable
- On or before 15 December - not less than 60% of tax payable
- On or before 15 March - not less than 100% of tax payable (date for current year has been extended to 18th March)
What is the Penalty if I don’t pay Advance Tax?
If during the year, you have not paid advance tax instalments or have paid lesser than the percentage specified, you will be required to pay interest of 1% per month under section 234C of the IT Act. If you have not paid any advance tax during the year or advance tax paid was less than 90%, then you will be liable to an additional interest of 1% per month under section 234B of the IT Act.
How to Pay Advance Tax
You can pay Advance Tax as per the following process:-
- Challan no ITNS 280 should be filled out with all the correct details of the taxpayer
- The filled challan along with amount should be submitted to any bank accepting tax payments.
- Keeping in view your convenience you can also pay tax online through any bank facilitating e-payment of taxes.
You may mail your tax queries to firstname.lastname@example.org. Rishabh Parakh is a Pune based chartered accountant and a director of Money Plant Consulting a leading Tax & Investment advisory service provider. He also runs a personal financial blog www.moneyplantconsulting.net/blog