When do I have to pay advance tax?

Updated: Monday, September 16, 2013, 10:49 [IST]

In case your tax liability for a financial year exceeds Rs. 10,000/-, you are required to pay a portion of your total tax liability as advance tax prior to the end of the financial year. Such amount paid in advance in respect of the total tax liability is referred as advance tax.

Consequently, advance tax is to be deposited with the authorities in the same year in which the income is earned. For instance, if your income tax liability for the financial year 2013-2014 has surpassed Rs. 10,000/- then in such a case you ought to deposit the advance tax before the end of F.Y 2013-204. However, this may not be applicable if there is a TDS already deducted and you don't anticipate more liability than that.

Individuals liable to file advance tax

Individuals with source of income other than salary, including interest income on fixed deposits, capital gains on sale of house property or shares, business income are required to file and deposit advance tax after making adjustments in lieu of losses or expenses. Salaried class individuals with source of income other than salary are also required to pay advance tax.

Business class and professionals are also liable to pay advance tax as their tax liability is deemed to be high on account of their earnings. Also, companies and corporates are required to pay off their income tax dues before the end of the financial year as advance tax.

Self-employed professionals and business class are liable to pay advance tax in three installments of 30%, 30% and 40% on 15th September, 15thDecember and 15th March respectively. While companies have to settle their advance tax dues on 15th June, 15th September, 15th December and 15th March.

Rationale of Advance tax

The Income tax department of India encourages advance tax payment as receipt of advance tax enables the government to garner income on a continuous basis all through the year.

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