Everything You Need to Know about Advance Tax Payment in India

Everything You Need to Know about Advance Tax Payment in India

In India, paying taxes is a civic responsibility, and understanding the nuances of advance tax is crucial for individuals and businesses alike. Here's a comprehensive guide on what you need to know about advance tax payment.

What is Advance Tax?

Advance tax, also known as pay-as-you-earn tax, is the practice of paying a portion of your estimated annual income tax liability in installments before the end of the financial year. It ensures a steady inflow of revenue for the government and prevents last-minute tax burdens on taxpayers.

Who is Liable to Pay Advance Tax?

Advance tax is applicable to:

1. Salaried Individuals:
   • Individuals with a salary income exceeding Rs 2.5 lakh are required to pay advance tax.
2. Self-Employed and Professionals:
   • Business owners, freelancers, and professionals with an annual tax liability of Rs 10,000 or more need to pay advance tax.
3. Corporate Entities:
   • Companies are required to pay advance tax in four installments.

Advance Tax Due Dates:

The due dates for advance tax payments are as follows:

1. 15% by June 15th
2. 45% by September 15th
3. 75% by December 15th
4. 100% by March 15th

How to Calculate Advance Tax:

1. Estimate Income:
   • Calculate your expected annual income, including salary, business profits, rental income, and other sources.
2. Deduct Deductions:
   • Subtract eligible deductions under sections like 80C, 80D, etc., from your estimated income.
3. Calculate Tax Liability:
   • Use the applicable tax slabs to determine your tax liability.
4. Divide and Pay:
   • Pay advance tax in installments as per the due dates mentioned earlier.

Penalties for Non-Payment:

Failure to pay advance tax can result in interest under Section 234B and 234C of the Income Tax Act. The interest is levied on the shortfall of the actual payment against the due installment.

How to Pay Advance Tax:

1. Online Payment:
   • Utilize online modes like net banking to make advance tax payments.
2. Physical Challan:
   • Visit authorized banks to deposit advance tax using the physical challan.
3. E-Payment Facilities:
   • Utilize government-approved e-payment facilities to ensure a hassle-free process.

Checking Advance Tax Paid:

1. Form 26AS:
   • Keep track of your advance tax payments through Form 26AS available on the Income Tax Department's website.

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