Keep your date with advance tax today

There is every likelihood that you have come across the word ‘advance tax’ during many of your interactions before. But it could be just that you have not bothered to find out more about it and have put it off for some other day. There’s just one problem here: Your ignorance could put you in trouble.

The term is self-explanatory, which means paying your tax liability partially before the end of the fiscal year. And September 15, that is today, comes up as the last day to clear up that first tranche.

Do YOU need to pay?
If you are an employee with a regular salary and tax is deducted at source, then nothing to worry as you are simply out of the loop. But it kicks in if you invest in stocks or mutual funds and earn capital gains. Interest income from investments, house property, shop or from any other business apart from your job are some of the other parameters that put you in the pay-up bracket. Then, there is this additional requirement that the tax outgo should exceed `10,000 in a financial year.

Apart from this, corporates and people who have their own business operations are also supposed to pay up. There’s some respite, however, for senior citizens who don’t have a business or a professional income since this financial year onwards, they have been kept out of the advance tax ambit.

It may so happen that pre-empting capital gains may sometimes prove a bit difficult. Balwant Jain, chief financial officer, Apnapaisa, cites an example: If one sells a house on December 1, it’s hard to get a clear picture on the tax outgo and subsequently pay in the first instalment. In this case, the person can pay advance tax of 60% when the next instalment is due.

What happens if you miss the deadline?
All that one has to do is to make a projection or estimate based on which the advance tax payable is calculated. Thus, depending on the slab you fit into, the tax calculated can be paid in three or four instalments. For non-corporate entities, it has to be cleared in three tranches. This means 30% has to be paid by September 15, another 30%, that is 60% of the total liability, by December 15 and 100% by  March 15 of this fiscal year.

In the case of a default, you will have to cough up simple interest at 1% for months the tax has not been paid. Ravindra Jain, principal consultant, Corporate Advisory & Taxation Services, RSM Astute Consulting, explains that if at the end of the year, you have `50,000 as tax liability and you paid only `25,000, you will have to pay the interest amount on the difference actually due every instalment.

There’s also this possibility that at the end of the financial year, you realise that your assessment has gone wrong and you owe more to the income tax department. In this scenario, you will have to calculate the shortfall and pay that extra in the next instalment. Conversely, if you have ended up paying more than what you actually owe, you can expect the refunds from the government.

Experts are clear that putting off tax payment till the cut-off can at best be avoided. So, it is better to pay up than delay the inevitable.

How do you pay?
This brings us to the procedural aspect of paying advance tax. Here, you don’t need to submit any documents on your actual income. You can either log in and pay through tax portals. Alternatively, you can pay at banks approved by the government. For this, a duly filled-in chalan, along with a cheque, needs to be submitted at the branch.

Unfortunately, the common tendency among most of us is to sleep over something unless the deadline is over the head. But then, there are chances that you may miss it altogether and face the prospect of paying a penalty at the time of the final assessment, which we are sure, you would be keen to avoid.