Taxpayers are required to pay income tax in advance if his or her income tax liability during the financial year is expected to be Rs. 10, 000 or likely to exceed Rs. 10, 000 per year. Paying it in advance i.e. before the actual liability arises, is called advance tax. Provisions of advance tax is applicable to all individuals, self employed persons, business man and corporate.
Advance tax is calculated on the total estimated taxable income of the assessee after deducting all expenses required to generate such income and TDS deducted by other persons from the source of income.
If you are a salary employee and your net income tax liability after deduction of TDS is not likely to exceed Rs. 10, 000 then you are not liable to pay advance tax for the year. If your expectations are that, the liability will be Rs. 10, 000 or more then you need to pay advance tax. To avoid such things you can disclose your loss from house property and interest from bank account to your employer to consider it for TDS calculation.
All self employed persons whose IT liability is likely to exceed Rs. 10, 000 after deducting TDS (as deducted by other persons from your source of income) need to pay advance tax to the IT department before the due dates as specified in the IT Act. In this article we will be discussing advance tax payment due dates and interest provisions for non payment of advance tax.
Who is eligible for Advance Tax
All assessees are liable if their expected income tax liability after deducting TDS if any is likely to be Rs. 10, 000 or likely to exceed Rs. 10, 000 at the end of the financial year. All assessee includes salary persons, self employed persons, business man, private limited companies and public limited companies.
Due dates for payment of advance tax
As discussed above, advance tax is applicable to all assessee including corporate and non corporate. But in IT Act, we have two separate due dates for payment of advance tax. One set of due dates are for corporate and the other set of due dates for non corporate.
Advance tax payment Due dates for corporate assessee
Corporate means companies incorporated in India including a private limited company and a public limited company.
Amount Payable on or before due dates
|On or before 15th June of the financial year||Not Less than 15% of total advance tax payable
|On or Before 15th September Of the financial year||
Not less than 45% of the total advance tax payable as reduced by the advance tax amount paid in last installment
|On or before 15th December Of the financial year||Not less than 75% of the total advance tax payable as reduced by the advance tax amount paid in last installments
|On or before 15th March Of the financial year||100% of the advance tax payable as reduced by the advance tax amount paid in last installments
Advance tax payment Due dates for non corporate assessee
Non corporate are other than companies which includes individual, partnership firm and HUF
|Due dates||Amount Payable on or before due dates|
|On or before 15 the June of the financial year||NIL|
|On or Before 15th September Of the financial year||Not less than 30% of total advance tax payable
|On or before 15th December Of the financial year||Not less than 60% of the total advance tax payable as reduced by the advance tax amount paid in last installment
|On or before 15th March Of the financial year||100% of the total advance tax payable as reduced by the advance tax amount paid in last installements
How to pay my advance tax
You can pay it in two ways;
- Online payment
- Manual Payment
Through online payment you need to fill out “challan no: 280” and deposit the money online by using your net banking account. While filling up the Challan no: 280 you need to enter following things correctly;
- Chose either “0020” or “0021” based on your applicability
- Enter your PAN number correctly
- Chose assessment year as the year that is applicable for the financial year for which you are making payment
- Under tax payment segment select “100-advance tax”
- Select the bank name from where you want to make payment.
In manual payment you need to visit a bank and deposit it against your PAN number.
Interest on Late Payment of advance tax
If you have not paid advance tax before the due dates as mentioned above then you are liable to pay penal interest on such amount payable by you.
Interest under section 234B
If the assessee is liable to pay advance tax but failed to pay it or paid less than 90% of total liability payable then such assessee will be liable to pay simple interest @ 1% for every month or part of a month to IT department.
The period for which interest payable would be the period starting from 1st day of April next following such financial year to the date of determination of total income.
Interest under section 234C
If you are not paid advance tax as per the percentage mentioned above then you will be liable to pay penal interest of 1% (simple interest) per month on the defaulted amount for 3 months. If you have not paid such amount before 15th march then 1% would be payable for every month till the payment of final tax amount.
You may be charged with both interest amount under section 234B and 234C if you have not paid such amount before the respective date as mentioned under these sections.
How to calculate Advance tax
- Step 1: Estimate your total income for the whole financial year
- Step2: Calculate your IT liability based on the rates and provisions applicable to you
- Step3: Deduct TDS amount as deducted from your source of income to arrive at your net liability
- Step4: On the net amount you calculate surcharge and education cess as applicable to you
- Step 5: Add step 4 and step 3 to arrive at your IT liability
If step 5 is equal or more than Rs. 10, 000 then you are liable for advance tax. If it is less than Rs. 10, 000 then no need to pay it.
If during the year you have paid advance tax more than your income tax liability then you can get refund for the extra amount paid. While filling your IT return you need to claim such refund.
Applicability of advance tax to Resident Senior Citizen
A resident senior citizen aged 60 years or more will not be liable for advance tax if such senior citizen does not have any income chargeable under the head “profits and gains of business or profession”.
After making payment of your advance tax you need to keep the proof of such payment safely as at the year end if required you need to prove that you already made the payment.