Advance Tax is a form of Income Tax which is payable in installments instead of Lumpsum Payment at the year end and should be made before the due dates specified by Income Tax Department. It is an obligation to pay advance tax whoever needs to pay such.
Know more about the Advance Tax, Due Dates, Installments, Exceptions, Calculation, Consequences for Non-Payment, Non-Applicability of Interest u/s 234C
Advance Tax: What, When & How to Pay
Advance Tax is required to be paid if the estimated tax liability is more than Rs 10,000 in a year.
1. Due Dates and Installments of Advance Tax?
The Advance Tax payment schedule for both the companies and Non-Companies (except for 44AD and 44ADA) are as follows
| S.No | Due Date of Installment | Amount of Installment |
|---|---|---|
| 1 | On or before 15 th June | 15% of Tax Liability |
| 2 | On or before 15th September | 45% of Tax Liability |
| 3 | On or before 15th December | 75% of Tax Liability |
| 4 | On or before 15th March | 100% of Tax Liability |
2. Exceptions for Payment of Advance Tax?
In order to reduce genuine compliance hardship, some exceptions are provided regarding payment of advance tax
- Senior Citizens (60 years or more) are not required to pay advance tax if their income does not consist of Business or Profession Income. Senior citizens are allowed to discharge their liability in form of self-assessment tax
- The Taxpayers following 44AD and 44ADA are required to pay the advance tax only in 1 installment i.e., 15th March of the financial year
Any Amount paid by way of advance tax on or before March 31st is also treated as advance tax paid during the financial year.
3. How to compute Advance Tax?
- Compute (Estimate) Total Income for the whole year including Salary, rental income, interest, profits from business, capital gains etc.
- Compute the Deductions available u/s Chapter VIA and other relevant sections and arrive at the Net Taxable Income
- Compute the Tax Liability on Net Taxable Income and Deduct the TDS or any relief available u/s 89 or 90 / 90A / 91.
- If the Final Tax Liability is more than Rs 10,000 the taxpayer is required to pay Advance tax at specified intervals.
4. How to pay Advance Tax?
Visit How to pay Income Tax due Online in India? to get the detailed instructions.
Make sure you select Type of Payment: (100) ADVANCE TAX.
If the amount paid as advance tax is higher than the total tax liability, the assesse will receive the excess amount as a refund. Interest @ 6% per annum will be paid by the Income Tax department to the assesse on the excess amount if the amount is more than 10% of tax liability.
5. Consequences for Non-Payment of Advance Tax
Interest u/s 234B and 234C are charged if the advance tax is not paid by the taxpayer at specified due dates
- Interest u/s 234B: If the Advance Tax paid before March 31 is less tan 90% of Total Tax, Interest u/s 234B will be levied @ 1% per month from the next month i.e., April
- Interest u/s 234C: If the Taxpayer does not paid the advance taxes @ 15% / 45% / 75% / 100% on or before due dates, then the interest u/s 234C will be levied @ 1% per month
6. Non-Applicability of Interest u/s 234C
Interest u/s 234C is not levied in the following cases if the income consists of following incomes
- Capital Gains. Know more @ Capital Gains, a Complete Guide
- Winnings from lotteries or Puzzles
- Profits and gains from Business or Profession if the Income arises for first time
Know more on TDS, TCS, Advance, Self assessment Tax Frequently asked questions