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Advance Tax: 7 Must Know Points For All Taxpayers
Advance Tax is a part payment of tax liability by an individual or business entity that he has to pay before the end of the financial year. In the case of income tax, an individual pays the liability only once during the course of the year, the same is not true in the case of advance tax.
During the financial year, when an assessee's total tax liability exceeds Rs 10,000 at that time advance tax is applicable. However, if there is a TDS that is applicable, then there is no need to pay an advance tax.
Advance Tax - Dates and Rates
For Non Corporate Entities
| Self employed and businessmen | |
|---|---|
| Due date of installment | Amount payable |
| By September 15 | Up to 30% of Estimated tax payable |
| By December 15 | Up to 60% of Estimated Tax payable |
| By March 15 | 100% Tax |
For Corporate Entities
| Companies | |
|---|---|
| Due date of installment | Amount payable |
| By June 15 | Up to 15% of estimated tax payable |
| By September 15 | Up to 45% of estimated tax payable |
| By December 15 | Up to 75% of estimated tax payable |
| By March 15 | 100% of the tax liability |
Here are 7 must know points on advance tax that individuals should know
1. A salaried employee does not need to pay advance tax as the employer deducts Tax Deduted At Source (TDS). However, one needs to pay advance tax if an individual has other income apart from salary.
2. If an individual is earning income apart from his regular business/salaried income then he is liable to pay an advance tax. Other income can be from capital gains on shares or house property, interest on fixed deposits, winnings from lottery or races. However, the advance tax should be calculated after adjusting for expenses and losses that a person has made.
Click here to calculate your advance tax by using calculator
3. This is an easy provision for paying tax as the businessmen and self-employed may have the huge tax liability. Paying tax in installments will be helpful and by this income tax department can receive tax payments throughout the year.
4. Advance tax can be paid online through income tax department or by filling challan number ITNS 280. Know more on How to make advance tax payments?
5. Taxpayer will receive the refund amount if the advance tax is paid higher than the required amount. An interest of 6 per cent per annum will be paid on the excess amount, if, the amount exceeds 10 per cent per cent more than the actual tax.
6. If you have missed to pay the advance tax or paid lower than the required amount, the interest is calculated at 1 per cent per month by simple interest on the defaulted amount.
7. Senior citizen who is above the age of 60 and does not have any income from business or profession is not liable to pay advance tax.
Conclusion
Most individuals do not realize that they have to pay an advance tax, especially if their employer does not deduct TDS. And, in case the employer does deduct, if you have other income you need to pay advance tax. Be careful and check the dates of payment above or else you would have to pay a penal interest rate.
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