“On this world nothing is definite however demise and taxes” mentioned Benjamin Franklin
(Founding father of USA and face on America’s 100 greenback invoice/observe).
Advance tax, because the title implies, is the tax that one pays upfront. Advance tax is the revenue tax that’s payable in case your tax legal responsibility exceeds Rs 10,000 and needs to be paid in the identical yr through which revenue is obtained. It is usually referred to as as “Pay as you Earn” scheme because you pay the tax in the identical yr through which you earn revenue.
If you’re a Salaried worker and have revenue aside from revenue from wage then it is best to verify Advance Tax.
If you’re Freelancer, Professionals, companies, YouTuber, Blogger then you need to know and pay Advance Tax
- When you estimate that you’ll owe greater than Rs.10,000 on March 31 in taxes (after deducting TDS) then it is best to pay advance tax.
- You pay this tax in 4 installments and the due dates with Share of Advance Tax to be paid are 15 June(15%), 15 September(45%), 15 December(75%) and 15 March(100%).
- If the Earnings Tax shouldn’t be payable as per the above schedule, Curiosity is liable to be paid for late fee of tax as follows
- Curiosity below part 234B @ 1% per thirty days
- Curiosity below part 234C @ 1% per thirty days is payable if 90% of the tax shouldn’t be paid earlier than the tip of the monetary yr
- Advance Tax may be paid by submitting a Tax Cost Challan,ITNS 280.Challan
- Tax relevant: For particular person Choose 0021 : INCOME-TAX (OTHER THAN COMPANIES)
- Sort of Cost: Sort of fee depends upon why you’re paying revenue tax. Enter 100 for Advance Tax.
- You should declare Advance Tax whereas submitting Earnings Tax Return ITR
Who has to pay Advance Tax?
The provisions of the Earnings Tax Act make it compulsory for each particular person, self-employed skilled, businessman, and company to pay Advance Tax, on any revenue on which TDS(Tax Deducted at Supply) shouldn’t be paid. Each people, in addition to corporates, should pay this tax.
Advance Tax for Salaried Worker
If a person’s solely revenue is his wage, then the employer will deduct tax from his revenue(TDS) and submit it. In such a case there isn’t any trigger for fear over advance tax fee. The tax deducted can be made obtainable to the worker by the employer in Kind 16.
However when a Salaried worker has revenue aside from revenue from wage then he has to fret about Advance Tax. Ex revenue from different sources reminiscent of curiosity gained (on saving checking account), capital positive factors, lottery wins, from home property or from enterprise, then advance tax turns into related.
If one estimates that one will owe greater than Rs.10,000 on March 31 in taxes (after deducting TDS) then it is best to pay advance tax.
Freelancers, Professionals, companies, YouTuber
Presumptive revenue for Professionals: Unbiased professionals reminiscent of docs, legal professionals, architects, and so on. come below the presumptive scheme below part 44ADA. They need to pay the entire of their advance tax legal responsibility in a single installment on or earlier than 15 March. They will additionally pay the whole tax due by 31 March.
Presumptive revenue for Companies: The taxpayers who’ve opted for a presumptive taxation scheme below part 44AD need to pay the entire quantity of their advance tax in a single installment on or earlier than 15 March. In addition they have an choice to pay all of their tax dues by 31 March.
Who doesn’t need to pay Advance Tax?
Advance Tax is NOT relevant when
- A senior citizen (the resident particular person who’s 60 yrs or extra) who do not need any revenue from enterprise & career, doesn’t need to pay advance tax. This variation was launched from AY 2013-14. Extra particulars at Senior Citizen : Earnings and Tax
- If one adopts presumptive taxation then one has to declare revenue on the prescribed price and no different deductions are allowed. One has to pay your complete advance tax by 15 March. That is relevant for
Learn how to discover if you need to pay advance tax
As we all know there are 5 sorts of Earnings, Earnings from Wage, Earnings from Home Property(Any residential or business property that you just personal can be taxed), Earnings from Capital Features (While you promote Mutual Funds, Shares, Bond, Gold, Land or Property, Earnings from Income and Features of Enterprise or Career & Earnings from Different Sources. Particulars in our article Perceive Earnings Tax
For advance tax verify
- Earnings from Home Property: In case you have rental revenue.
- Earnings from Capital Features: Have you ever offered Mutual Funds, Shares, Bond, Gold, Land, or Property. Tax categorized as Lengthy Time period Capital Acquire Tax(LTCG) and Brief Time period Capital Acquire(STCG) is predicated on the asset you offered, the time interval you owned the asset. Particulars in our article Capital Acquire Calculator on Sale on Property, Mutual Funds, Gold, Shares
- Earnings from Income and Features of Enterprise or Career: The revenue chargeable to tax is the distinction between the credit obtained on working the enterprise and bills incurred.
- Earnings from Different sources: Test the following revenue. Particulars in our article Earnings From Different Sources
- the curiosity of Saving Financial institution Account,
- Curiosity from Fastened Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS) and so on
- Curiosity from Earnings Tax Refund
- Household Pension
- Dividend Earnings: Dividend obtained on or after 1 April 2020 is taxable within the arms of the investor/shareholder. Particulars in our article Dividend and Tax
What if we don’t pay Advance Tax?
If you need to pay advance tax and When you fail to pay your Advance Tax or, in the event you pay lower than the stipulated tax, you’d be penalised and must pay further below Sections 234A, 234B, 234C. So there isn’t any escaping Tax. Because the Earnings Tax workplace says “Pay Tax Karo Loosen up“
The curiosity is calculated at 1% easy curiosity per thirty days on the defaulted quantity for 3 months. The curiosity penalty would proceed as much as the following deadline. If even after the final deadline of 15 March, the tax shouldn’t be paid, then the 1% could be on the defaulted quantity for a month, till the tax is totally paid.
Why Pay Advance Tax?
Advance tax is without doubt one of the main instruments utilized by the Govt. to gather tax from the assesses throughout India. This pay as you go type of tax is designed in such a means that an assessee is made to pay tax to the Govt. in a ‘Pay as You Earn Scheme’. This primarily goals at decreasing the last-moment hassles to an assessee for fee of tax legal responsibility which can be due to both scarcity of time or funds.
The purpose of the Indian authorities behind establishing the advance tax system was to hurry up the tax assortment. This method additionally allowed the federal government to earn curiosity on the quantity collected as tax, thus rising funds to the federal government coffers.
How is advance Tax Calculated?
Advance tax is computed on revenue that a person would possibly earn through the yr, in that sense, it’s estimated revenue. The tax is calculated utilizing the charges relevant for the monetary yr.
Suppose after paying your first installment of tax on the estimated revenue, your precise revenue elevated attributable to some shares/mutual funds you offered, You will want to revise your revenue and accordingly pay the differential within the subsequent installment.
Though Advance Tax is liable to be paid on all incomes together with Capital Features, it’s troublesome to estimate the Capital Features which can come up in an yr. Subsequently, in such circumstances, it’s offered that if any such revenue arises after the due date of any installment, then, your complete quantity of tax payable on such capital achieve (after claiming exemption below part 54) shall be paid in remaining installments of Capital Features that are due. If your complete quantity of tax payable is so paid, then no curiosity on late fee can be levied
Listed under are the steps to calculate advance tax:
- Decide the Earnings: Decide the revenue you obtain aside from your wage. It’s essential to incorporate any ongoing agreements which may pay out later.
- Minus the Bills: Deduct your bills from the revenue. You’ll be able to deduct bills associated to your work (freelancing) reminiscent of lease of the work place, journey expense, web and telephone prices.
- Complete the Earnings: Add up different revenue that you just would possibly obtain within the type of lease, curiosity revenue, and so on. Deduct the TDS deducted out of your salaried revenue.
- Complete Advance Tax: If the tax due exceeds Rs.10,000 then you definitely’ll need to pay advance tax.
Advance tax Charges and Dates
From FY 2016-17 For each particular person and company taxpayers
| Due Date | Advance Tax Payable |
|---|---|
| On or earlier than fifteenth June | 15% of advance tax |
| On or earlier than fifteenth September | 45% of advance tax |
| On or earlier than fifteenth December | 75% of advance tax |
| On or earlier than fifteenth March | 100% of advance tax |
Under are the dates and percentages earlier than FY 2016-17.
| Due Date | Installment % of Advance Tax |
| fifteenth September | Up-to 30% |
| fifteenth December | Up-to 60% |
| fifteenth March | Up-to 100% |
For instance, suppose your whole tax legal responsibility(after deducting TDS) for this yr is Rs 1,00,000
So by fifteenth June you will have to pay 15% which involves Rs 15,000
So by fifteenth September you will have to pay 45% which involves Rs 45,00
By fifteenth December you’ll have to cowl 75%, so you will have to pay one other Rs 75,000.
By fifteenth March, 100% of advance tax involves Rs 100,000, you will have to pay one other Rs 25,000.
Penalty on not paying/paying much less Advance Tax: Sections 234A, 234B and 234C
When you owe greater than Rs.10,000(after deducting TDS) whereas submitting your returns, you can be penalized with Curiosity below sections 234A , 234 B & 234 C
Underneath Part 234C, there are three parts. For the primary instalment, the shortfall penalty is calculated for 3 months @1% p.m. Equally, within the second instalment, the shortfall penalty can also be calculated for 3 months @1% p.m and the ultimate instalment is calculated at a flat price if 1% for 1 month solely.
Underneath part 234B, penalty arises when the full quantity of advance tax paid together with the quantity of TDS is lower than 90% of the full tax legal responsibility. In such a case, curiosity is calculated at 1% per thirty days of the quantity of shortfall for the time interval from April to the month through which the return is filed.
Underneath part 234A, the legal responsibility arises solely when the return is filed after the due date which for AY 2020-21 is 30 Nov.
Finotax has nice Advance tax calculators. Test it out right here. Let’s take a look at these sections intimately.
Curiosity below part 234 C
234 C can be relevant in the event you don’t pay your advance taxes in common installments. As per the Earnings Tax Act, you’re presupposed to pay 15% of advance tax by 15 Jun, 30% of your advance tax by fifteenth Sep, 60% by fifteenth December and 100% by fifteenth March. Let’s see it by means of some examples.
Mr. Khushal is working a clothes store. Tax Legal responsibility of Mr. Khushal is Rs 45,500. He has paid advance tax as given under:
Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September, Rs. 12,000 on fifteenth December, Rs. 14,500 on fifteenth March. Is he liable to pay curiosity below part 234C, if sure, then how a lot?
Any tax paid until thirty first March can be handled as advance tax. Contemplating the above dates, the advance tax legal responsibility of Mr. Khushal at totally different installments can be as follows:
1) In first installment: Not lower than 15% of tax payable needs to be paid by fifteenth June. The tax legal responsibility is Rs. 45,500 and 15% of 45,500 quantities to Rs. 6,825. Therefore, he ought to pay Rs. 6,825 by 15thJune. He has paid Rs. 8,000, therefore, there isn’t any brief fee in case of first installment.
2) In second installment: Not lower than 45% of tax payable needs to be paid by 15thSeptember. Tax legal responsibility is Rs. 45,500 and 45% of 45,500 quantities to Rs. 20,475. Therefore, he ought to pay Rs. 20,475 by fifteenth September. He has paid Rs. 8,000 on fifteenth June and Rs. 11,000 on fifteenth September (i.e. whole of Rs. 19,000 is paid until 15thSeptember). There’s brief fee of Rs. 1,475 (i.e. Rs. 20,475 – Rs 19,000).
Although there may be brief fee of Rs. 1,475 however Mr. Khushal won’t be liable to pay curiosity below part 234C as a result of he has paid minimal of 36% of advance tax payable by fifteenth September. He has paid Rs. 19,000 until fifteenth September and 36% of 45,500 quantities to Rs. 16,380. Therefore, no curiosity shall be levied in case of deferment of second installment.
3) In third installment: Not lower than 75% of tax payable needs to be paid by fifteenth December. Tax legal responsibility is Rs. 45,500 and 75% of 45,500 quantities to Rs. 34,125. Therefore, he ought to pay Rs. 34,125 by fifteenth December. He has paid Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September and Rs. 12,000 on fifteenth December (i.e. whole of Rs. 31,000 is paid until 15thDecember). There’s a brief fee of Rs. 3,125 (i.e. Rs. 34,125 – Rs 31,000). Therefore, he can be liable to pay curiosity below part 234C on account of brief fall of Rs. 3,125 (*).
There’s a brief fall of Rs. 3,125 in case of third installment. Resulting from brief fall in case of third installment, curiosity below part 234C will be levied. Curiosity can be levied at 1% per thirty days or a part of the month on the brief paid quantity of Rs. 3,100 (i.e. Rs. 3,125 rounded off to Rs. 3,100 as per Rule 119A). Curiosity can be levied for a interval of three months. In different phrases, curiosity can be levied on Rs. 3,100 at 1% per thirty days for 3 months. Curiosity below part 234C will come to Rs. 93.
4) In final installment: 100% of tax payable needs to be paid by fifteenth March. The entire tax legal responsibility of Rs. 45,500 is paid by Mr. Khushal by fifteenth March (i.e. 8,000 on fifteenth June, Rs. 11,000 on15th September, Rs. 12,000 on fifteenth December and Rs 14,500 on fifteenth March). Therefore, there isn’t any brief fee in case of final installment. Thus, Mr. Khushal won’t be liable to pay curiosity below part 234C in case of final instalment.
Curiosity below part 234 B
234 B can be relevant when the full advance tax paid is lower than 90 % Tax Payable. This can be charged at 1% per thirty days until you pay your remaining taxes. Let’s work it out by means of an Instance:
Mr. Suraj is a businessman. His tax legal responsibility as decided below part 143(1) is Rs. 28,400. He has not paid any advance tax however there’s a TDS credit score of Rs. 10,000 in his account. He has paid the steadiness tax on thirty first July i.e. on the time of submitting the return of revenue. Will he be liable to pay curiosity below part 234B, if sure, then how a lot
On this case, the tax legal responsibility (after permitting credit score of TDS) of Mr. Suraj involves Rs. 18,400 (i.e. Rs. 28,400 – Rs. 10,000) which exceeds Rs. 10,000 and therefore, he can be liable to pay advance tax. He has not paid any advance tax and therefore, he can be liable to pay curiosity below part 234B. Curiosity below part 234B can be levied at 1% per thirty days or a part of the month. In this case, Mr. Suraj has paid the excellent tax on thirty first July and therefore, curiosity below part 234B can be levied for the interval from 1st April to thirty first July i.e. for 4 months. Curiosity can be levied on unpaid tax legal responsibility of Rs. 18,400. Curiosity at 1% per thirty days on Rs. 18,400 for 4 months will come to Rs. 736.
When you pay our taxes in between April – July interval then curiosity @1% can be utilized solely on the steadiness tax payable .
On-line Advance Tax Calculators(Free)
Video on Advance Tax
This 8:32 video explains Advance Tax.
This video talks about how you can Calculate Advance Tax
Learn how to pay advance Tax?
You’ll be able to pay advance tax in India by means of two strategies: on-line or offline. Right here’s a breakdown of each:
On-line Cost:
- Go to the Earnings Tax Division’s e-payment web site: [income tax e payment ON Income Tax Department portal.incometax.gov.in]
- Enter your PAN and cell quantity and proceed after verification with OTP.
- Choose the Evaluation 12 months (2024-25 for present situation) and select “Advance Tax (100)” below Sort of Cost.
- Fill within the challan particulars like State Code, circle code (refer web site for particulars).
- Select the fee methodology (web banking or debit card) and your financial institution.
- Preview the challan for accuracy and click on “Pay Now” to finish the fee.
Offline Cost:
- Obtain Challan 280 kind from the Earnings Tax Division web site.
- Fill the challan with particulars like your PAN, evaluation yr, tax kind (100 for Advance Tax).
- Point out the installment quantity (depends upon the due date).
- Submit the finished challan at any financial institution licensed to gather tax funds.
Extra Suggestions:
- Use an advance tax calculator to estimate your tax legal responsibility for correct fee.
- Make a copy of the challan (on-line fee receipt or Challan 280 copy) for record-keeping throughout ITR submitting.
- The final date for the present installment (March 2024) is March fifteenth, so make sure you pay earlier than the deadline to keep away from curiosity penalties.
Advance Tax may be paid by submitting a Tax Cost Challan,ITNS 280.Challan, at designated branches of banks empanelled with the Earnings Tax Division. Branches of ICICI, HDFC and SBI settle for Advance Tax Cost Challans. Alternatively, people may pay Advance Tax on-line by means of the Earnings Tax Dept / NSDL web site. e-Cost facilitates fee of direct taxes on-line by taxpayers. To avail of this facility the taxpayer is required to have a net-banking account with any of the Approved Banks.
Video on Learn how to Pay Advance Tax
https://www.youtube.com/watch?v=uyS00Ofc6og
Confirm Advance Tax in Kind 26AS
Half C of Kind 26AS has particulars of Tax Paid (aside from TDS or TCS). In case you have paid Advance Tax or Self Evaluation Tax it will seem on this part. Please confirm that advance tax or self evaluation tax particulars are displaying up in Kind 26AS, In the event that they don’t match along with your particulars please contact the Financial institution.
Present Advance Tax in ITR
After paying revenue tax by means of Challan 280 what subsequent? Is your accountability over. No. That you must present the tax paid in your ITR, In case you have paid Advance/ Self Evaluation tax by means of Challan 280 fill within the particulars in Tax paid and make it possible for your tax legal responsibility is 0 earlier than submitting the return as defined for ITR1 in our article Fill Excel ITR1 Kind : Earnings, TDS, Advance Tax and proven in picture under.
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It’s mentioned “Earnings tax returns are essentially the most imaginative fiction being written as we speak.”
Do you pay Advance Tax?