“On this world nothing is for certain however loss of life and taxes” stated Benjamin Franklin
(Founding father of USA and face on America’s 100 greenback invoice/notice).
Advance tax, because the title implies, is the tax that one pays upfront. Advance tax is the revenue tax that’s payable in case your tax legal responsibility exceeds Rs 10,000 and must be paid in the identical 12 months through which revenue is obtained. Additionally it is referred to as as “Pay as you Earn” scheme because you pay the tax in the identical 12 months through which you earn revenue.
If you’re a Salaried worker and have revenue aside from revenue from wage then you must verify Advance Tax.
If you’re Freelancer, Professionals, companies, YouTuber, Blogger then it’s a must to know and pay Advance Tax
- If you happen to estimate that you’ll owe greater than Rs.10,000 on March 31 in taxes (after deducting TDS) then you must pay advance tax.
- You pay this tax in 4 installments and the due dates with Share of Advance Tax to be paid are 15 June(15%), 15 September(45%), 15 December(75%) and 15 March(100%).
- If the Revenue Tax shouldn’t be payable as per the above schedule, Curiosity is liable to be paid for late cost of tax as follows
- Curiosity beneath part 234B @ 1% monthly
- Curiosity beneath part 234C @ 1% monthly is payable if 90% of the tax shouldn’t be paid earlier than the top of the monetary 12 months
- Advance Tax may be paid by submitting a Tax Cost Challan,ITNS 280.Challan
- Tax relevant: For particular person Choose 0021 : INCOME-TAX (OTHER THAN COMPANIES)
- Sort of Cost: Sort of cost is determined by why you might be paying revenue tax. Enter 100 for Advance Tax.
- You could declare Advance Tax whereas submitting Revenue Tax Return ITR
Who has to pay Advance Tax?
The provisions of the Revenue Tax Act make it compulsory for each particular person, self-employed skilled, businessman, and company to pay Advance Tax, on any revenue on which TDS(Tax Deducted at Supply) shouldn’t be paid. Each people, in addition to corporates, should pay this tax.
Advance Tax for Salaried Worker
If a person’s solely revenue is his wage, then the employer will deduct tax from his revenue(TDS) and submit it. In such a case there isn’t a trigger for fear over advance tax cost. The tax deducted will likely be made out there to the worker by the employer in Kind 16.
However when a Salaried worker has revenue aside from revenue from wage then he has to fret about Advance Tax. Ex revenue from different sources akin to curiosity gained (on saving checking account), capital features, lottery wins, from home property or from enterprise, then advance tax turns into related.
If one estimates that one will owe greater than Rs.10,000 on March 31 in taxes (after deducting TDS) then you must pay advance tax.
Freelancers, Professionals, companies, YouTuber
Presumptive revenue for Professionals: Unbiased professionals akin to docs, attorneys, architects, and many others. come beneath the presumptive scheme beneath part 44ADA. They must pay the entire of their advance tax legal responsibility in a single installment on or earlier than 15 March. They will additionally pay the total tax due by 31 March.
Presumptive revenue for Companies: The taxpayers who’ve opted for a presumptive taxation scheme beneath part 44AD must pay the entire quantity of their advance tax in a single installment on or earlier than 15 March. In addition they have an choice to pay all of their tax dues by 31 March.
Who doesn’t must pay Advance Tax?
Advance Tax is NOT relevant when
- A senior citizen (the resident particular person who’s 60 yrs or extra) who should not have any revenue from enterprise & occupation, doesn’t must pay advance tax. This alteration was launched from AY 2013-14. Extra particulars at Senior Citizen : Income and Tax
- If one adopts presumptive taxation then one has to declare revenue on the prescribed charge and no different deductions are allowed. One has to pay all the advance tax by 15 March. That is relevant for
How you can discover if it’s a must to pay advance tax
As we all know there are 5 kinds of Revenue, Revenue from Wage, Revenue from Home Property(Any residential or business property that you simply personal will likely be taxed), Revenue from Capital Features (Whenever you promote Mutual Funds, Shares, Bond, Gold, Land or Property, Revenue from Earnings and Features of Enterprise or Career & Revenue from Different Sources. Particulars in our article Understand Income Tax
For advance tax verify
- Revenue from Home Property: You probably have rental revenue.
- Revenue from Capital Features: Have you ever offered Mutual Funds, Shares, Bond, Gold, Land, or Property. Tax categorised as Lengthy Time period Capital Achieve Tax(LTCG) and Quick Time period Capital Achieve(STCG) relies on the asset you offered, the time interval you owned the asset. Particulars in our article Capital Gain Calculator on Sale on Property, Mutual Funds, Gold, Stocks
- Revenue from Earnings and Features of Enterprise or Career: The revenue chargeable to tax is the distinction between the credit obtained on operating the enterprise and bills incurred.
- Revenue from Different sources: Verify the following revenue. Particulars in our article Income From Other Sources
- the curiosity of Saving Financial institution Account,
- Curiosity from Mounted Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS) and many others
- Curiosity from Revenue Tax Refund
- Household Pension
- Dividend Revenue: Dividend obtained on or after 1 April 2020 is taxable within the palms of the investor/shareholder. Particulars in our article Dividend and Tax
What if we don’t pay Advance Tax?
If it’s a must to pay advance tax and If you happen to fail to pay your Advance Tax or, for those who pay lower than the stipulated tax, you’d be penalised and must pay further beneath Sections 234A, 234B, 234C. So there isn’t a escaping Tax. Because the Revenue Tax workplace says “Pay Tax Karo Calm down“
The curiosity is calculated at 1% easy curiosity monthly on the defaulted quantity for 3 months. The curiosity penalty would proceed as much as the subsequent deadline. If even after the final deadline of 15 March, the tax shouldn’t be paid, then the 1% can be on the defaulted quantity for a month, till the tax is absolutely paid.
Why Pay Advance Tax?
Advance tax is likely one of the main instruments utilized by the Govt. to gather tax from the assesses throughout India. This pay as you go type of tax is designed in such a means that an assessee is made to pay tax to the Govt. in a ‘Pay as You Earn Scheme’. This primarily goals at lowering the last-moment hassles to an assessee for cost of tax legal responsibility which can be due to both scarcity of time or funds.
The purpose of the Indian authorities behind establishing the advance tax system was to hurry up the tax assortment. This method additionally allowed the federal government to earn curiosity on the quantity collected as tax, thus rising funds to the federal government coffers.
How is advance Tax Calculated?
Advance tax is computed on revenue that a person would possibly earn through the 12 months, in that sense, it’s estimated revenue. The tax is calculated utilizing the charges relevant for the monetary 12 months.
Suppose after paying your first installment of tax on the estimated revenue, your precise revenue elevated on account of some shares/mutual funds you offered, You will have to revise your revenue and accordingly pay the differential within the subsequent installment.
Though Advance Tax is liable to be paid on all incomes together with Capital Features, it’s troublesome to estimate the Capital Features which can come up in an 12 months. Due to this fact, in such circumstances, it’s offered that if any such revenue arises after the due date of any installment, then, all the quantity of tax payable on such capital achieve (after claiming exemption beneath part 54) shall be paid in remaining installments of Capital Features that are due. If all the quantity of tax payable is so paid, then no curiosity on late cost will likely be levied
Listed beneath are the steps to calculate advance tax:
- Decide the Revenue: Decide the revenue you obtain aside from your wage. It’s essential to incorporate any ongoing agreements that may pay out later.
- Minus the Bills: Deduct your bills from the revenue. You’ll be able to deduct bills associated to your work (freelancing) akin to lease of the work place, journey expense, web and cellphone prices.
- Whole the Revenue: Add up different revenue that you simply would possibly obtain within the type of lease, curiosity revenue, and many others. Deduct the TDS deducted out of your salaried revenue.
- Whole Advance Tax: If the tax due exceeds Rs.10,000 then you definately’ll must pay advance tax.
Advance tax Charges and Dates
From FY 2016-17 For each particular person and company taxpayers
| Due Date | Advance Tax Payable |
|---|---|
| On or earlier than fifteenth June | 15% of advance tax |
| On or earlier than fifteenth September | 45% of advance tax |
| On or earlier than fifteenth December | 75% of advance tax |
| On or earlier than fifteenth March | 100% of advance tax |
Beneath are the dates and percentages earlier than FY 2016-17.
| Due Date | Installment % of Advance Tax |
| fifteenth September | Up-to 30% |
| fifteenth December | Up-to 60% |
| fifteenth March | Up-to 100% |
For instance, suppose your complete tax legal responsibility(after deducting TDS) for this 12 months is Rs 1,00,000
So by fifteenth June you have to to pay 15% which involves Rs 15,000
So by fifteenth September you have to to pay 45% which involves Rs 45,00
By fifteenth December you’ll have to cowl 75%, so you have to to pay one other Rs 75,000.
By fifteenth March, 100% of advance tax involves Rs 100,000, you have to to pay one other Rs 25,000.
Penalty on not paying/paying much less Advance Tax: Sections 234A, 234B and 234C
If you happen to owe greater than Rs.10,000(after deducting TDS) whereas submitting your returns, you can be penalized with Curiosity beneath sections 234A , 234 B & 234 C
Below Part 234C, there are three elements. For the primary instalment, the shortfall penalty is calculated for 3 months @1% p.m. Equally, within the second instalment, the shortfall penalty can also be calculated for 3 months @1% p.m and the ultimate instalment is calculated at a flat charge if 1% for 1 month solely.
Below part 234B, penalty arises when the entire quantity of advance tax paid together with the quantity of TDS is lower than 90% of the entire tax legal responsibility. In such a case, curiosity is calculated at 1% monthly of the quantity of shortfall for the time interval from April to the month through which the return is filed.
Below part 234A, the legal responsibility arises solely when the return is filed after the due date which for AY 2020-21 is 30 Nov.
Finotax has nice Advance tax calculators. Test it out here. Let’s take a look at these sections intimately.
Curiosity beneath part 234 C
234 C will likely be relevant for those who don’t pay your advance taxes in common installments. As per the Revenue Tax Act, you’re purported to pay 15% of advance tax by 15 Jun, 30% of your advance tax by fifteenth Sep, 60% by fifteenth December and 100% by fifteenth March. Let’s see it by some examples.
Mr. Khushal is operating a clothes store. Tax Legal responsibility of Mr. Khushal is Rs 45,500. He has paid advance tax as given beneath:
Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September, Rs. 12,000 on fifteenth December, Rs. 14,500 on fifteenth March. Is he liable to pay curiosity beneath part 234C, if sure, then how a lot?
Any tax paid until thirty first March will likely be handled as advance tax. Contemplating the above dates, the advance tax legal responsibility of Mr. Khushal at completely different installments will likely be as follows:
1) In first installment: Not lower than 15% of tax payable must be paid by fifteenth June. The tax legal responsibility is Rs. 45,500 and 15% of 45,500 quantities to Rs. 6,825. Therefore, he ought to pay Rs. 6,825 by 15thJune. He has paid Rs. 8,000, therefore, there isn’t a brief cost in case of first installment.
2) In second installment: Not lower than 45% of tax payable must be paid by 15thSeptember. Tax legal responsibility is Rs. 45,500 and 45% of 45,500 quantities to Rs. 20,475. Therefore, he ought to pay Rs. 20,475 by fifteenth September. He has paid Rs. 8,000 on fifteenth June and Rs. 11,000 on fifteenth September (i.e. complete of Rs. 19,000 is paid until 15thSeptember). There may be brief cost of Rs. 1,475 (i.e. Rs. 20,475 – Rs 19,000).
Although there may be brief cost of Rs. 1,475 however Mr. Khushal won’t be liable to pay curiosity beneath part 234C as a result of he has paid minimal of 36% of advance tax payable by fifteenth September. He has paid Rs. 19,000 until fifteenth September and 36% of 45,500 quantities to Rs. 16,380. Therefore, no curiosity shall be levied in case of deferment of second installment.
3) In third installment: Not lower than 75% of tax payable must be paid by fifteenth December. Tax legal responsibility is Rs. 45,500 and 75% of 45,500 quantities to Rs. 34,125. Therefore, he ought to pay Rs. 34,125 by fifteenth December. He has paid Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September and Rs. 12,000 on fifteenth December (i.e. complete of Rs. 31,000 is paid until 15thDecember). There’s a brief cost of Rs. 3,125 (i.e. Rs. 34,125 – Rs 31,000). Therefore, he will likely be liable to pay curiosity beneath part 234C on account of brief fall of Rs. 3,125 (*).
There’s a brief fall of Rs. 3,125 in case of third installment. Attributable to brief fall in case of third installment, curiosity beneath part 234C will be levied. Curiosity will likely be levied at 1% monthly or a part of the month on the brief paid quantity of Rs. 3,100 (i.e. Rs. 3,125 rounded off to Rs. 3,100 as per Rule 119A). Curiosity will likely be levied for a interval of three months. In different phrases, curiosity will likely be levied on Rs. 3,100 at 1% monthly for 3 months. Curiosity beneath part 234C will come to Rs. 93.
4) In final installment: 100% of tax payable must be paid by fifteenth March. The whole tax legal responsibility of Rs. 45,500 is paid by Mr. Khushal by fifteenth March (i.e. 8,000 on fifteenth June, Rs. 11,000 on15th September, Rs. 12,000 on fifteenth December and Rs 14,500 on fifteenth March). Therefore, there isn’t a brief cost in case of final installment. Thus, Mr. Khushal won’t be liable to pay curiosity beneath part 234C in case of final instalment.
Curiosity beneath part 234 B
234 B will likely be relevant when the entire advance tax paid is lower than 90 % Tax Payable. This will likely be charged at 1% monthly until you pay your remaining taxes. Let’s work it out by an Instance:
Mr. Suraj is a businessman. His tax legal responsibility as decided beneath part 143(1) is Rs. 28,400. He has not paid any advance tax however there’s a TDS credit score of Rs. 10,000 in his account. He has paid the stability tax on thirty first July i.e. on the time of submitting the return of revenue. Will he be liable to pay curiosity beneath part 234B, if sure, then how a lot
On this case, the tax legal responsibility (after permitting credit score of TDS) of Mr. Suraj involves Rs. 18,400 (i.e. Rs. 28,400 – Rs. 10,000) which exceeds Rs. 10,000 and therefore, he will likely be liable to pay advance tax. He has not paid any advance tax and therefore, he will likely be liable to pay curiosity beneath part 234B. Curiosity beneath part 234B will likely be levied at 1% monthly or a part of the month. In this case, Mr. Suraj has paid the excellent tax on thirty first July and therefore, curiosity beneath part 234B will likely be levied for the interval from 1st April to thirty first July i.e. for 4 months. Curiosity will likely be levied on unpaid tax legal responsibility of Rs. 18,400. Curiosity at 1% monthly on Rs. 18,400 for 4 months will come to Rs. 736.
If you happen to pay our taxes in between April – July interval then curiosity @1% will likely be utilized solely on the stability tax payable .
On-line Advance Tax Calculators(Free)
Video on Advance Tax
This 8:32 video explains Advance Tax.
This video talks about learn how to Calculate Advance Tax
How you can pay advance Tax?
You’ll be able to pay advance tax in India by two strategies: on-line or offline. Right here’s a breakdown of each:
On-line Cost:
- Go to the Revenue Tax Division’s e-payment web site: [income tax e payment ON Income Tax Department portal.incometax.gov.in]
- Enter your PAN and cell quantity and proceed after verification with OTP.
- Choose the Evaluation 12 months (2024-25 for present situation) and select “Advance Tax (100)” beneath Sort of Cost.
- Fill within the challan particulars like State Code, circle code (refer web site for particulars).
- Select the cost methodology (internet banking or debit card) and your financial institution.
- Preview the challan for accuracy and click on “Pay Now” to finish the cost.
Offline Cost:
- Obtain Challan 280 kind from the Revenue Tax Division web site.
- Fill the challan with particulars like your PAN, evaluation 12 months, tax sort (100 for Advance Tax).
- Point out the installment quantity (is determined by the due date).
- Submit the finished challan at any financial institution approved to gather tax funds.
Extra Suggestions:
- Use an advance tax calculator to estimate your tax legal responsibility for correct cost.
- Make a copy of the challan (on-line cost receipt or Challan 280 copy) for record-keeping throughout ITR submitting.
- The final date for the present installment (March 2024) is March fifteenth, so make sure you pay earlier than the deadline to keep away from curiosity penalties.
Advance Tax may be paid by submitting a Tax Cost Challan,ITNS 280.Challan, at designated branches of banks empanelled with the Revenue Tax Division. Branches of ICICI, HDFC and SBI settle for Advance Tax Cost Challans. Alternatively, people may pay Advance Tax on-line by the Income Tax Dept / NSDL website. e-Cost facilitates cost of direct taxes on-line by taxpayers. To avail of this facility the taxpayer is required to have a net-banking account with any of the Licensed Banks.
Video on How you can Pay Advance Tax
https://www.youtube.com/watch?v=uyS00Ofc6og
Confirm Advance Tax in Kind 26AS
Half C of Kind 26AS has particulars of Tax Paid (aside from TDS or TCS). You probably have paid Advance Tax or Self Evaluation Tax it will seem on this part. Please confirm that advance tax or self evaluation tax particulars are displaying up in Kind 26AS, In the event that they don’t match along with your particulars please contact the Financial institution.
Present Advance Tax in ITR
After paying revenue tax by Challan 280 what subsequent? Is your duty over. No. You want to present the tax paid in your ITR, You probably have paid Advance/ Self Evaluation tax by Challan 280 fill within the particulars in Tax paid and guarantee that your tax legal responsibility is 0 earlier than submitting the return as defined for ITR1 in our article Fill Excel ITR1 Form : Income, TDS, Advance Tax and proven in picture beneath.
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