Employers are mandated to subtract tax from employees' salary according to their income tax bracket, but if the employee has additional sources of income, such as interest, dividend, rent, or capital gains, he or she may be prompted to pay advance tax on these earnings. Advance tax, as the name implies, applies to paying taxes against your other source of income before the completion of the fiscal year. If your tax due is higher than Rs 10,000 in a financial year, you must pay advance tax in the same year in which the income is received or earned.
Who is required to pay advance tax?
Every individual whose assessed tax due for the year is more than or equivalent to Rs 10,000 is entitled to pay advance tax, according to section 208 of the Income Tax Act 1961. Senior persons over the age of 60 who do not have any income from a business or profession are exempt from paying advance tax. In most cases, businessmen and professionals are required to pay advance tax because they have income from sources where tax is not deducted at the source in line with the income tax slab.
If a salaried individual gets incomes other than salary, he or she may be required to pay advance tax. Many salaried people have other sources of income, such as interest from bank and post office deposits, dividends, capital gains or have rental or business income. In this case, a salaried individual having income from other sources is required to evaluate his or her gross income from other sources and pay advance tax if the overall tax debt on such income exceeds Rs 10,000 after calculating tax deducted at source (TDS).
Applicable due dates and advance tax payable rates
According to the Act, taxpayers must pay advance tax in four instalments of 15%, 45 per cent, 75%, and 100% on or before June 15, September 15, December 15, and March 15. Individuals who declare their earnings under the Presumptive Taxation Scheme (PTS) must pay the appropriate advance tax in one instalment on or before March 15. PTS, as defined in Section 44AD of the Act, enable a businessman or professional to submit returns depending on an anticipated income. Any advance tax paid on, or before 31 March is also classified as advance tax paid throughout the fiscal year.
|Due date||Advance tax payable|
|On or before 15th June||15%|
|On or before 15th September||45%|
|On or before 15th December||75%|
|On or before 15th March||100%|
How to pay advance tax online and offline?
Challan No. ITNS 280 is the form that must be completed and submitted before the due dates. Prerequisites Challan No. ITNS 280 are personal identification number (PAN) details, assessment year, and payment type (advance tax or self-assessment tax). Following payment, a Challan Identification Number (CIN) will be issued. You must maintain a record of this CIN and use it when submitting your income tax return. Also, confirm that the IT department has acknowledged the online payment submitted via ITNS 280. To pay advance tax online, go to the income tax department's website at www.incometaxindia.gov.in and select the e-Pay taxes link and you will be required to the portal of National Securities Depository Ltd (NSDL). Click on challan no./ITNS 280, enter the necessary details, and complete the payment.
You can seek a rebate under Section 80C while calculating your income for the purpose of calculating your advance tax. An NRI is also required to pay advance tax on income generated in India in accordance with the provisions of the Income Tax Act in effect for the applicable assessment year. If you miss paying your advance tax debt on or before the due dates specified, the unpaid amount will be subject to penal interest under Section 234 of the Income Tax Act.