Advance Tax Payments in India

Advance Tax Payments in India

Understanding Advance Tax

The Indian tax system allows taxpayers to pre-pay a portion of their estimated tax liability throughout the financial year through a system called advance tax. This "pay-as-you-earn" scheme helps distribute tax obligations more evenly and avoids a large year-end payment burden.

Who Needs to Pay Advance Tax?

·       Individuals: If your total tax liability after adjusting Tax Deducted at Source (TDS) is expected to exceed Rs. 10,000 in a financial year, you're liable to pay advance tax. This applies to freelancers, professionals, salaried individuals (except for certain cases), and senior citizens (with some exceptions).

·       Businesses: Businesses opting for the presumptive tax regime under Section 44AD must pay their entire advance tax liability in one installment by March 15th. However, they also have the option to pay by March 31st.

·       Professionals under Presumptive Income: Similar to businesses under the presumptive scheme, professionals like architects, doctors, lawyers, and consultants covered under Section 44ADA can pay their entire advance tax in one go by March 15th or opt for full payment by March 31st.

Exemptions from Advance Tax

·       Senior Citizens: Individuals over 60 who don't run a business are generally exempt from advance tax.

·       Minimal Tax Liability: If the TDS deducted throughout the year surpasses your total tax liability, you do not need to pay advance tax.

·       Salaried Individuals with Sufficient TDS: Salaried individuals whose tax liability is fully covered by TDS deducted at source are exempt from advance tax. However, any income from non-salary sources like interest, rent, or capital gains would still be subject to advance tax.

Advance Tax Payment Schedule

Calculating Your Advance Tax Liability

Here's a step-by-step guide to estimate your advance tax liability:

•       Estimate Your Annual Income: Consider all income sources like salary, capital gains, interest income, rent, professional income, etc.
•      Gross Taxable Income: Add your salary income to your estimated income from other sources for the year. Remember, advance tax isn't paid on salary income.
•       Tax Slab Application: The combined income might push you into a higher tax bracket, affecting your tax liability.
•       Tax Calculation: Calculate the payable tax amount based on the latest income tax slabs.
•       Adjust for TDS: Subtract the TDS deducted or expected to be deducted according to the applicable tax slabs for different income sources.
•       Advance Tax Payment: If the remaining tax liability after TDS deduction exceeds Rs. 10,000, you're liable to pay advance tax.

Making Advance Tax Payments Online

The Income Tax Department of India offers a convenient online portal for advance tax payments:

•       Visit the Income Tax e-filing portal (https://eportal.incometax.gov.in/).
•       Click on "e-pay Tax" under "Quick Links."
•       Enter your PAN details and mobile number, then click "Continue."
•       Enter the received OTP and click "Proceed."
•       Choose the "Income Tax" option and click "Continue."
•       Select the assessment year and payment type as "Advance Tax (100)" and click "Continue."
•       Fill in all required tax details.
•       Choose your preferred payment mode and bank, then click "Continue."
•       Review the challan details and click "Pay Now" to complete the payment.
•      Upon successful payment, you'll receive an acknowledgement with a challan serial number and BSR code. Keep a copy of this receipt for your tax return filing.