Advance Tax: Meaning, Calculations, Exemption, Due Date

June 15, 2023, is last date to pay the the first instalment of your advance tax for the financial year 2023-2024 (FY24).

Table of Contents

What is advance tax?

Those earning an income in India are liable to pay income tax. One way this liability can be met is through payment on advance tax. Advance tax is a tax an individual can pay to the government estimating his annual income for an entire financial year.

Who should pay advance tax?

Under Section 208 of the Income Tax Act, 1961, a person whose estimated tax liability for the year is more than, or equal to Rs 10,000, is liable to pay advance tax. However, senior citizens are not liable to pay advance tax if they don’t have any income from business or profession. NRIs earning an income in India can also pay advance tax.

See also: Income tax calculator: Know how to calculate income tax for the financial year

Is advance tax paid in one go for the whole year?

No, advance tax is paid at specific intervals through a year.

Advance tax payment due dates

15%: Before June 15 of the FY

45%: On or before September 15

75%: On or before December 15

100%: On or before March 15

Note 1: Taxpayers, who opted for presumptive taxation scheme under Section 44AD or Section 44ADA can pay the entire advance tax by March 15

Note 2: Any tax paid till March 31 will be treated advance tax payment.

Note 3: Those missing these deadlines are liable to pay interest as a penalty under Section 234B and Section 234C.

What if you fail to make the payment on specific dates?

Interest under Section 234B and 234C of the income tax Act is levied over failure to pay advance tax on time.

What forms are used to pay advance tax?

Challan 280 is used to pay advance tax.

How is advance tax paid?

Rule 125 of the income-tax law says that company must pay advance taxes through the electronic payment mode using the internet banking facility of authorised banks. Taxpayers who are required to get their accounts audited should therefore pay taxes only through the electronic payment mode using the internet banking facility of authorised banks. Any other taxpayer can pay tax either by electronic mode or by depositing Challan 280 at the bank.

See also: How to pay advance tax online?

Do salaried people have to pay advance tax?

Since the responsibility to deduct tax at source lies with the employer, salaried individuals whose employer deducts TDS under the head ‘Income from Salary’ don’t have to pay advance tax. However, in case they earn any other income apart from salary, which is not reported to an employer, they have to pay the advance tax. Those moonlighting are thus liable to pay advance tax on their income. Salaried taxpayers earning rent, interest and dividend must declare it to their employer so that TDS is deducted. That way, the employer will deduct higher TDS but you will not report your additional income on your own. Since misreporting of income can land you in major trouble, roping in your employer is a great way to stay out of trouble with the tax authorities.

FAQs

Are taxpayers free to make advance tax payment as and when they want?

No, taxpayers have to stick with specific timelines to make advance tax payment.

Who decides advance tax payment dates?

These dates are decided and notified by the income tax department.

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Sunita Mishra

An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.

In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
sunita.mishra@proptiger.com