Advance Income Tax Payment
The advance tax applies to the tax owed within the year by an individual to the income tax agency without waiting until the end of the year. This is to ensure that, over the year, the government will raise revenue more uniformly. Although the government collects tax at source through the obligatory implementation of TDS, the income of an individual, while taxable, does not incur full TDS in certain situations. Thus the person may demand an income tax refund. In comparison, in some situations, the deducted TDS could be smaller than the gross tax obligation for the year. The advance tax must be deposited in all such situations.
Advance Tax Payment Criteria
If your total tax liability (after TDS adjustment) exceeds ₹ 10,000 (Rupees Ten Thousand) in the financial year, then you must pay tax early. Prepaid taxes apply to all taxpayers, including income earners, freelancers, professionals and adults. However, adults over the age of 60 and who do not run a business are exempt from paying their taxes prematurely. When calculating your advance tax, you need to include income from all available annual sources under the various headings of income generation. Other common exceptions to prepaid taxes are:
- Senior citizens (over 60 years) who do not work in any business are exempt from paying prepaid taxes.
- People earning under the TDS net do not have to pay tax in advance on income from income. However, they may still have to pay tax in advance on income from other sources such as interest, profits, taxes and other income.
- If the deductible TDS exceeds the annual tax payable, the person is exempt from paying early tax.
How to calculate advance tax?
- First, you need to estimate your annual income. Note that tax calculations are based on income estimates. The various salary categories that must be considered are interest, income, employment income, rent, minority income, their combined income with that of the taxpayer or any other income that may occur during the year.
- Now, add the income from the above income to determine the total taxable income. Note that while prepaid taxes may not be paid on income, the total amount of income and income from other sources may very well change the applicable tax slip and lead to additional tax liability.
- Now, enter the most recent income tax slider to calculate the tax payable.
- The next step is to remove the TDS that has already been pulled or can be pulled according to the TDS slabs that work on different types of revenue. To find out more about TDS prices, click here.
- In the event that the tax debt after deducting TDS is more than ₹ 10,000, you must pay early tax.
- An advance tax calculator is available online on the Department of Taxation website. You can fill in all the required fields and know the amount you have to pay as income tax.
- In some cases, it is likely that you may not be able to balance your expectations, and usually, at the end of the year, you may receive more income than you expected. In such a case, if you do not pay the full amount in advance, you may also be required to pay interest and penalties in the form of non-payment in advance. Therefore, it is wise to weigh your income carefully and pay more in advance than you can pay in advance. You can apply the same credit to your ITR and earn the same amount.
Advance Tax Payment Due Dates for AY 2020-21
|Advance Tax Due Dates||Advance Tax Installment Amount|
|On or before 15th June||Not less than 15% of advance tax liability|
|On or before 15th September||Not less than 45% of advance tax liability|
|On or before 15th December||Not less than 75% of advance tax liability|
|On or before 15th March||100% of advance tax liability|
Advance Tax Payment Online
You can now pay prepaid taxes online using Challan ITNS 280 and select “Payment Type” as “(100) Pre-Tax”. Challan is available online at the tax department’s website https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp. You can pay using the net-banking site of the major banks in India. Advance tax calls are made immediately and are identified by 3 different fields – (1) BSR bank branch code, (2) Date of payment and (3) serial number. Keep a copy of the challan and check to see if it shows up properly on the Form of 26AS available on the Income Tax website. You can claim a prepaid tax debt at the time of submitting your ITR after the end of the year.
Penalty for failing to pay advanced tax
Interest under section 234B: – If you fail to pay your prepayment or the tax paid by you is less than 90% of the tax assessed, then you will be obliged to pay an interest rate of 1% on a monthly basis. In the event that high-quality tax is not paid, the interest will be calculated on the amount equal to the tax levied, or otherwise, it will be calculated on the amount of the advance tax that is not taxed.
A penalty under section 234C: – In the event that you do not pay your prepayment tax installment on time, you will be charged 1% interest over the next three months on the default amount as a penalty. The penalty is simply because of the delay in paying your taxes.
What if advance tax is paid more than required?
The advance tax paid by you often appears to be higher than your tax obligation. You will obtain the extra balance as a refund in any situation. However, if the total is more than 10 percent of the tax obligation, you will be able to receive interest from the Income Tax Agency at a rate of 6 percent annually.
✅ Can I pay advance tax after the due date?
Yes, you can pay your taxes early after the due date. However, the due date for postage will attract interest and due to late payment.
✅ When should advance tax be paid?
Advanced taxes are payable usually by four times; June 15, September 15, December 15, and March 15.
✅ What is the penalty for late payment of advance tax?
The penalty for late payment of advanced taxes is classified under two categories.
- Under Section 234C: 1% interest on the amount of advanced tax payable within the prescribed period.
- 15% of tax debt on June 15
- 45% of the outstanding tax debt by September 15
- 75% of outstanding tax balance on December 15, too
- 100% of outstanding tax arrears on March 15.
- Under Section 234B: If up to 90% of the outstanding tax debt is not paid at the end of the financial year, 1% of the simple interest is applicable as a penalty.
✅ Is the payment of advance tax compulsory?
If the tax debt is more than ₹ 10,000, then it is compulsory to pay your advance tax. However, for payers, companies automatically deduct taxes under TDS.
✅ Who is liable for advance tax?
In terms of section 208 of the Income Tax Act 1961, everyone with an annual tax liability of ₹ 10,000 will pay tax in advance, subject to advance tax.
✅ How is the advance tax payment calculated?
Advance Tax is calculated using the fair value of the total tax on the estimated individual income for that year.
✅ Can a salaried person pay advance tax?
Yes, a paid person can also pay in advance. In fact, prepayment tax applies to all tests, including paid employees. Call Dialabank to help with the process at 9878981166.
Table of Contents
- 1 Advance Income Tax Payment
- 2 Advance Tax Payment Criteria
- 3 How to calculate advance tax?
- 4 Advance Tax Payment Due Dates for AY 2020-21
- 5 Advance Tax Payment Online
- 6 What if advance tax is paid more than required?
- 7 FAQS
- 7.1 ✅ Can I pay advance tax after the due date?
- 7.2 ✅ When should advance tax be paid?
- 7.3 ✅ What is the penalty for late payment of advance tax?
- 7.4 ✅ Is the payment of advance tax compulsory?
- 7.5 ✅ Who is liable for advance tax?
- 7.6 ✅ How is the advance tax payment calculated?
- 7.7 ✅ Can a salaried person pay advance tax?