āOn this world nothing is definite however demise and taxesā stated Benjamin Franklin
(Founding father of USA and face on Americaās Ā 100 greenback invoice/word).
Advance tax, because the identify implies, is the tax that one pays prematurely. Advance tax is the earnings tax that’s payable in case your tax legal responsibility exceeds Rs 10,000 and ought to be paid in the identical yr during which earnings is obtained. It is usually referred to as as āPay as you Earnā scheme because you pay the tax in the identical yr during which you earn earnings.
In case you are a Salaried worker and have earnings aside from earnings from wage then it’s best to test Advance Tax.
In case you are Freelancer, Professionals, companies, YouTuber, Blogger then you must know and pay Advance Tax
- Ā In the event you estimate that you’ll owe greater than Rs.10,000 on March 31 Ā in taxes (after deducting TDS) then it’s best to 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 Earnings Tax shouldn’t be payable as per the above schedule, Curiosity is liable to be paid for late fee of tax as follows
- Curiosity below part 234B @ 1%Ā monthly
- Curiosity below part 234CĀ @ 1%Ā monthlyĀ is payable if 90% of the tax shouldn’t be paid earlier than the tip of the monetary yr
- Advance Tax will be paid by submitting a Tax Fee Challan,ITNS 280.Challan
- Tax relevant: For particular person ChooseĀ 0021 : INCOME-TAX (OTHER THAN COMPANIES)
- Kind of Fee: Kind of fee relies on why you’re paying earnings tax. Enter 100 for Advance Tax.
- It’s essential to declare Advance Tax whereas submitting Earnings Tax Return ITR
Who has to pay Advance Tax?
The provisions of the Earnings Tax Act make it compulsory for each particular person, self-employed skilled, businessman, and company to pay Advance Tax, on any earnings 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 personās solely earnings is his wage, then the employer will deduct tax from his earnings(TDS) and submit it. In such a case there isn’t a trigger for fear over advance tax fee. The tax deducted shall be made obtainable to the worker by the employer in Kind 16.
However when a Salaried worker has earnings aside from earnings from wage then he has to fret about Advance Tax. Ex earnings from different sources similar to curiosity gained (on saving checking account), capital positive aspects, 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 Ā in taxes (after deducting TDS) then it’s best to pay advance tax.
Freelancers, Professionals, companies, YouTuber
Presumptive earnings for Professionals: Impartial professionals similar to docs, attorneys, architects, and so forth. come below the presumptive scheme below 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 complete tax due by 31 March.
Presumptive earnings for Companies: The taxpayers who’ve opted for a presumptive taxation scheme below part 44AD must pay the entire quantity of their advance tax in a single installment on or earlier than 15 March. Additionally they have an choice to pay all of their tax dues by 31 March.
Who doesnāt must pay Advance Tax?
Advance Tax is NOT relevant when
- A senior citizen (the resident particular person who’s 60 yrs or extra) who shouldn’t have any earnings from enterprise & career, doesn’t must pay advance tax. This modification was launched from AY 2013-14. Extra particulars at Senior Citizen : Earnings and Tax
- Ā If one adopts presumptive taxation then one has to declare earnings on the prescribed price and no different deductions are allowed. One has to pay the complete advance tax by 15 March. That is relevant forĀ
Methods to discover if you must pay advance tax
As we all know there are 5 varieties of Earnings, Earnings from Wage, Earnings from Home Property(Any residential or industrial property that you simply personal shall be taxed), Earnings from Capital Positive factors (Whenever you promote Mutual Funds, Shares, Bond, Gold, Land or Property, Earnings from Earnings and Positive factors of Enterprise or Occupation & Earnings from Different Sources. Particulars in our article Perceive Earnings Tax
For advance tax test
- Earnings from Home Property: When you have rental earnings.
- Earnings from Capital Positive factors: Have you ever offered Mutual Funds, Shares, Bond, Gold, Land, or Property. Ā Tax categorized as Lengthy Time period Capital Acquire Tax(LTCG) and Quick Time period Capital Acquire(STCG) is predicated on the asset you offered, the time interval you owned the asset. Particulars in our article Capital Acquire Calculator on Sale on Property, Mutual Funds, Gold, Shares
- Earnings from Earnings and Positive factors of Enterprise or Occupation: The earnings chargeable to tax is the distinction between the credit obtained on operating the enterprise and bills incurred.
- Ā Earnings from Different sources: Test the following earnings. Particulars in our article Earnings From Different Sources
- the curiosity of Saving Financial institution Account,
- Curiosity from Mounted Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS) and so forth
- Curiosity from Earnings Tax Refund
- Household Pension
- Dividend Earnings: Dividend obtained on or after 1 April 2020 is taxable within the fingers of the investor/shareholder. Particulars in our article Dividend and Tax
What if we don’t pay Advance Tax?
If you must pay advance tax and In the event you fail to pay your Advance Tax or, if you happen to pay lower than the stipulated tax, you’ll be penalised and must pay further below Sections 234A, 234B, 234C. So there isn’t a escaping Tax. Ā Because the Earnings Tax workplace says āPay Tax Karo Calm downā
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 following 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 totally paid.
Why Pay Advance Tax?
Advance tax is likely one of the main instruments utilized by the Govt. to gather tax from theĀ assesses throughout India. This pay as you go type of tax is designed in such a manner that an assessee is made to pay tax to the Govt. in a āPay as You Earn Schemeā. This primarily goals at lowering the last-moment hassles to an assessee for fee of tax legal responsibility which can be due to both scarcity of time or funds.
The goal of the Indian authorities behind organising the advance tax system was to hurry up the tax assortment. This technique additionally allowed the federal government to earn curiosity on the quantity collected as tax, thus growing funds to the federal government coffers.
How is advance Tax Calculated?
Advance tax is computed on earnings that a person may earn in the course of the yr, Ā in that sense, it’s estimated earnings. The tax is calculated utilizing the charges relevant for the monetary yr.
Suppose after paying your first installment of tax on the estimated earnings, your precise earnings elevated as a result of some shares/mutual funds you offered, You’ll need to revise your earnings and accordingly pay the differential within the subsequent installment.
Though Advance TaxĀ is liable to be paid on all incomes together with Capital Positive factors, it’s tough to estimate the Capital Positive factors which can come up in an yr. Subsequently, in such instances, it’s offered that if any such earnings arises after the due date of any installment, then, the complete quantity of tax payable on such capital achieve (after claiming exemption below part 54) shall be paid in remaining installments of Capital Positive factors that are due. If the complete quantity of tax payable is so paid, then no curiosity on late fee shall be levied
Listed beneath are the steps to calculate advance tax:
- Decide the Earnings:Ā Decide the earnings you obtain aside from your wage. Itās vital to incorporate any ongoing agreements that may pay out later.
- Minus the Bills:Ā Deduct your bills from the earnings. You may deduct bills associated to your work (freelancing) similar to lease of the work place, journey expense, web and cellphone prices.
- Whole the Earnings:Ā Add up different earnings that you simply may obtain within the type of lease, curiosity earnings, and so forth. Deduct the TDS deducted out of your salaried earnings.
- Whole Advance Tax:Ā If the tax due exceeds Rs.10,000 then you definitelyāll must pay advance tax.
Advance tax Charges and Dates
From FY 2016-17Ā Ā 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 |
Under are the dates and percentagesĀ 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) Ā for this yr is Rs 1,00,000
So by fifteenth JuneĀ you will want to pay 15% which involves Rs 15,000
So by fifteenth September you will want to pay 45% which involves Rs 45,00
By fifteenth December you’ll have to cowl 75%, so you will want to pay one other Rs 75,000.
By fifteenth March, 100% of advance tax involves Rs 100,000, you will want to pay one other Rs 25,000.
Penalty on not paying/paying much less Advance Tax: Sections 234A, 234B and 234C
In the event you owe greater than Rs.10,000(after deducting TDS) whereas submitting your returns, you can be penalized with Ā Curiosity below 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 price if 1% for 1 month solely.
Below part 234B, penalty arises when the whole quantity of advance tax paid together with the quantity of TDS is lower than 90% of the whole 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 during 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 outĀ right here.Ā Letās have a look at these sections intimately.
Curiosity below part 234 C
234 C shall be relevant if you happen to donāt pay your advance taxes in common installments. Ā As per the Earnings Tax Act, youāre speculated 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. Letās see it by some examples.
Mr. Khushal is operating a clothes store. Tax Legal responsibility of Mr. Khushal is Rs 45,500. HeĀ has paid advance tax as given beneath:
Rs. 8,000 on fifteenth June,Ā Rs. 11,000 on fifteenth September,Ā Ā Rs. 12,000 on fifteenth December,Ā Ā Rs. 14,500 on fifteenth March. Ā Is he liable to pay curiosity below part 234C, if sure, then how a lot?
Any tax paid until thirty first March shall be handled as advance tax.Ā Contemplating the above dates, the advance tax legal responsibility of Mr. Khushal at completely differentĀ installments shall be as follows:
1) In first installment: Not lower than 15% of tax payable ought to be paid by fifteenth June.Ā The tax legal responsibility is Rs. 45,500 and 15% of 45,500 quantities to Rs. 6,825. Therefore, heĀ ought to pay Rs. 6,825 by 15thJune. He has paid Rs. 8,000, therefore, there isn’t a briefĀ fee in case of first installment.
2) In second installment: Not lower than 45% of tax payable ought to be paid byĀ 15thSeptember. Tax legal responsibility is Rs. 45,500 and 45% of 45,500 quantities to Rs.Ā 20,475. Therefore, he ought to pay Rs. 20,475 by fifteenth September. He has paid Rs.Ā 8,000 on fifteenth June and Rs. 11,000 on fifteenth September (i.e. complete of Rs. 19,000 isĀ paid until 15thSeptember). There may be brief fee of Rs. 1,475 (i.e. Rs. 20,475 ā RsĀ 19,000).
Although there may be brief fee of Rs. 1,475 however Mr. Khushal is not going to be liable toĀ pay curiosity below part 234C as a result of he has paid minimal of 36% of advanceĀ tax payable by fifteenth September. He has paid Rs. 19,000 until fifteenth September andĀ 36% of 45,500 quantities to Rs. 16,380. Therefore, no curiosity shall be levied in case ofĀ deferment of second installment.
3) In third installment: Not lower than 75% of tax payable ought to be paid by fifteenthĀ December. Tax legal responsibility is Rs. 45,500 and 75% of 45,500 quantities to Rs. 34,125.Ā Therefore, he ought to pay Rs. 34,125 by fifteenth December. He has paid Rs. 8,000 on fifteenthĀ June, Rs. 11,000 on fifteenth September and Rs. 12,000 on fifteenth December (i.e. complete ofĀ Rs. 31,000 is paid until 15thDecember). There’s a brief fee of Rs. 3,125 (i.e.Ā Rs. 34,125 ā Rs 31,000). Therefore, he shall be liable to pay curiosity below partĀ 234C on account of brief fall of Rs. 3,125 (*).
There’s a brief fall of Rs. 3,125 in case of third installment. On account of brief fall in case of third installment, curiosity below part 234C willĀ be levied. Curiosity shall be levied at 1% monthly or a part of the month on the brief paidĀ quantity of Rs. 3,100 (i.e. Rs. 3,125 rounded off to Rs. 3,100 as per Rule 119A). CuriosityĀ shall be levied for a interval of three months. In different phrases, curiosity shall be levied on Rs.Ā 3,100 at 1% monthly for 3 months. Curiosity below part 234C will come to Rs. 93.
4) In final installment: 100% of tax payable ought to be paid by fifteenth March. The entireĀ tax legal responsibility of Rs. 45,500 is paid by Mr. Khushal by fifteenth March (i.e. 8,000 on fifteenthĀ June, Rs. 11,000 on15th September, Rs. 12,000 on fifteenth December and Rs 14,500Ā on fifteenth March). Therefore, there isn’t a brief fee in case of final installment. Thus,Ā Mr. Khushal is not going to be liable to pay curiosity below part 234C in case of finalĀ instalment.
Curiosity below part 234 B
234 B shall be relevant when the whole advance tax paid is lower than Ā 90 % Tax Payable. Ā This shall be charged at 1% monthly until you pay your remaining taxes. Letās work it out by an Instance:
Mr. Suraj is a businessman. His tax legal responsibility as decided below part 143(1) is Rs.Ā 28,400. He has not paid any advance tax however there’s a TDS credit score of Rs. 10,000 in hisĀ account. He has paid the stability tax on thirty first July i.e. on the time of submitting the return ofĀ earnings. Will he be liable to pay curiosity below 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.Ā 18,400 (i.e. Rs. 28,400 ā Rs. 10,000) which exceeds Rs. 10,000 and therefore, he shall beĀ liable to pay advance tax.Ā He has not paid any advance tax and therefore, he shall be liable to pay curiosity below partĀ 234B. Curiosity below part 234B shall be levied at 1% monthly or a part of the month. InĀ this case, Mr. Suraj has paid the excellent tax on thirty first July and therefore, curiosity below part 234B shall be levied for the interval from 1st April to thirty first July i.e. for 4 months.Ā Curiosity shall be levied on unpaid tax legal responsibility of Rs. 18,400. Curiosity at 1% monthly onĀ Rs. 18,400 for 4 months will come to Rs. 736.
In the event you pay our taxes in between April ā July interval then curiosity @1% shall 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
Methods to pay advance Tax?
You may pay advance tax in India by two strategies: on-line or offline. Right hereās a breakdown of each:
On-line Fee:
- Go to the Earnings Tax Divisionās 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 state of affairs) and select āAdvance Tax (100)ā below Kind of Fee.
- Fill within the challan particulars like State Code, circle code (refer web site for particulars).
- Select the fee technique (internet banking or debit card) and your financial institution.
- Preview the challan for accuracy and click on āPay Nowā to finish the fee.
Offline Fee:
- Obtain Challan 280 type from the Earnings Tax Division web site.
- Fill the challan with particulars like your PAN, evaluation yr, tax kind (100 for Advance Tax).
- Point out the installment quantity (relies on the due date).
- Submit the finished challan at any financial institution licensed to gather tax funds.
Extra Suggestions:
- Use an advance tax calculator to estimate your tax legal responsibility for correct fee.
- Make a copy of the challan (on-line fee 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 will be paid by submitting a Tax Fee Challan,ITNS 280.Challan, at designated branches of banks empanelled with the Earnings Tax Division. Branches of ICICI, HDFC and SBI settle for Advance Tax Fee Challans. Alternatively, people may pay Advance Tax on-line by the Earnings Tax Dept / NSDL web site. e-Fee facilitates fee 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 Approved Banks.
Video on Methods to Pay Advance Tax
https://www.youtube.com/watch?v=uyS00Ofc6og
Confirm Advance Tax in Kind 26AS
Half C of Kind 26AS hasĀ particulars of Tax Paid (aside from TDS or TCS). When you have paidĀ Advance Tax or Self Evaluation Tax itĀ will seem on this part.Ā Ā Please confirm that advance tax or self evaluation tax particulars are displaying up in Kind 26AS, In the event that they donāt match along with your particulars please contact the Financial institution.
Present Advance Tax in ITR
After paying earnings tax by Challan 280 what subsequent? Is your duty over. No. It is advisable to present the tax paid in your ITR,Ā When you have paid Advance/ Self Evaluation tax by Challan 280 fill within the particulars in Tax paid and ensure that your tax legal responsibility is 0 earlier than submitting the returnĀ as defined for ITR1 in our articleĀ Fill Excel ITR1 Kind : Earnings, TDS, Advance TaxĀ and proven in picture beneath.
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Do you pay Advance Tax?
