āOn this world nothing is definite however demise and taxesā mentioned Benjamin Franklin
(Founding father of USA and face on Americaās Ā 100 greenback invoice/notice).
Advance tax, because the title 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 needs to be paid in the identical yr through which earnings is obtained. Additionally it is known as as āPay as you Earnā scheme because you pay the tax in the identical yr through which you earn earnings.
If you’re a Salaried worker and have earnings aside from earnings from wage then you must verify Advance Tax.
If you’re Freelancer, Professionals, companies, YouTuber, Blogger then it’s important to know and pay Advance Tax
- Ā For those who estimate that you’ll owe greater than Rs.10,000 on March 31 Ā in taxes (after deducting TDS) then you must pay advance tax.
- You pay this tax in 4 installments and the due dates with Proportion of Advance Tax to be paid are 15 June(15%), 15 September(45%), 15 December(75%) and 15 March(100%).
- If the Earnings Tax will not 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 per thirty days
- Curiosity below part 234CĀ @ 1%Ā per thirty daysĀ is payable if 90% of the tax will not be paid earlier than the top of the monetary yr
- Advance Tax could be paid by submitting a Tax Cost Challan,ITNS 280.Challan
- Tax relevant: For particular person ChooseĀ 0021 : INCOME-TAX (OTHER THAN COMPANIES)
- Sort of Cost: Sort of fee depends upon why you’re paying earnings tax. Enter 100 for Advance Tax.
- You should 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) will not 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 any trigger for fear over advance tax fee. The tax deducted shall be made out there 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 reminiscent of 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 Ā in taxes (after deducting TDS) then you must pay advance tax.
Freelancers, Professionals, companies, YouTuber
Presumptive earnings for Professionals: Impartial professionals reminiscent of medical doctors, legal professionals, architects, and so on. 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. In addition 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 would not have any earnings from enterprise & occupation, doesn’t must pay advance tax. This transformation 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 your complete advance tax by 15 March. That is relevant forĀ
The best way to discover if it’s important to pay advance tax
As we all know there are 5 kinds 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 aspects (Once you promote Mutual Funds, Shares, Bond, Gold, Land or Property, Earnings from Income and Positive aspects of Enterprise or Career & Earnings from Different Sources. Particulars in our article Perceive Earnings Tax
For advance tax verify
- Earnings from Home Property: When you have rental earnings.
- Earnings from Capital Positive aspects: Have you ever bought Mutual Funds, Shares, Bond, Gold, Land, or Property. Ā Tax categorized as Lengthy Time period Capital Achieve Tax(LTCG) and Brief Time period Capital Achieve(STCG) relies on the asset you bought, the time interval you owned the asset. Particulars in our article Capital Achieve Calculator on Sale on Property, Mutual Funds, Gold, Shares
- Earnings from Income and Positive aspects of Enterprise or Career: The earnings chargeable to tax is the distinction between the credit obtained on working 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 Fastened Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS) and so on
- 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 it’s important to pay advance tax and For those who fail to pay your Advance Tax or, when you pay lower than the stipulated tax, you’d be penalised and must pay additional below Sections 234A, 234B, 234C. So there isn’t any escaping Tax. Ā Because the Earnings Tax workplace says āPay Tax Karo Chill outā
The curiosity is calculated at 1% easy curiosity per thirty days 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 will not 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 means that an assessee is made to pay tax to the Govt. in a āPay as You Earn Schemeā. This primarily goals at decreasing 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 purpose of the Indian authorities behind establishing 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 would possibly 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 consequence of some shares/mutual funds you bought, You have to 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 aspects, it’s troublesome to estimate the Capital Positive aspects which can come up in an yr. Subsequently, in such circumstances, it’s offered that if any such earnings arises after the due date of any installment, then, your complete quantity of tax payable on such capital acquire (after claiming exemption below part 54) shall be paid in remaining installments of Capital Positive aspects that are due. If your complete quantity of tax payable is so paid, then no curiosity on late fee shall be levied
Listed under 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 which may pay out later.
- Minus the Bills:Ā Deduct your bills from the earnings. You may deduct bills associated to your work (freelancing) reminiscent of lease of the work place, journey expense, web and cellphone prices.
- Complete the Earnings:Ā Add up different earnings that you simply would possibly obtain within the type of lease, curiosity earnings, and so on. Deduct the TDS deducted out of your salaried earnings.
- Complete 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 whole tax legal responsibility(after deducting TDS) Ā for this yr is Rs 1,00,000
So by fifteenth JuneĀ you will have to pay 15% which involves Rs 15,000
So by fifteenth September you will have to pay 45% which involves Rs 45,00
By fifteenth December you’ll have to cowl 75%, so you will have to pay one other Rs 75,000.
By fifteenth March, 100% of advance tax involves Rs 100,000, you will have to pay one other Rs 25,000.
Penalty on not paying/paying much less Advance Tax: Sections 234A, 234B and 234C
For those who 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
Underneath Part 234C, there are three parts. For the primary instalment, the shortfall penalty is calculated for 3 months @1% p.m. Equally, within the second instalment, the shortfall penalty can be calculated for 3 months @1% p.m and the ultimate instalment is calculated at a flat price if 1% for 1 month solely.
Underneath part 234B, penalty arises when the full quantity of advance tax paid together with the quantity of TDS is lower than 90% of the full tax legal responsibility. In such a case, curiosity is calculated at 1% per thirty days of the quantity of shortfall for the time interval from April to the month through which the return is filed.
Underneath 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 take a look at these sections intimately.
Curiosity below part 234 C
234 C shall be relevant when you donāt pay your advance taxes in common installments. Ā As per the Earnings Tax Act, youāre presupposed 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 means of some examples.
Mr. Khushal is working a clothes store. Tax Legal responsibility of Mr. Khushal is Rs 45,500. HeĀ has paid advance tax as given under:
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 totally differentĀ installments shall be as follows:
1) In first installment: Not lower than 15% of tax payable needs 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 any briefĀ fee in case of first installment.
2) In second installment: Not lower than 45% of tax payable needs 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. whole of Rs. 19,000 isĀ paid until 15thSeptember). There’s brief fee of Rs. 1,475 (i.e. Rs. 20,475 ā RsĀ 19,000).
Although there’s 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 needs 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. whole 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. Attributable to brief fall in case of third installment, curiosity below part 234C willĀ be levied. Curiosity shall be levied at 1% per thirty days 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% per thirty days for 3 months. Curiosity below part 234C will come to Rs. 93.
4) In final installment: 100% of tax payable needs to be paid by fifteenth March. The wholeĀ 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 any 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 full advance tax paid is lower than Ā 90 % Tax Payable. Ā This shall be charged at 1% per thirty days until you pay your remaining taxes. Letās work it out by means of 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% per thirty days 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% per thirty days onĀ Rs. 18,400 for 4 months will come to Rs. 736.
For those who 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 find out how to Calculate Advance Tax
The best way to pay advance Tax?
You may pay advance tax in India by means of two strategies: on-line or offline. Right hereās a breakdown of each:
On-line Cost:
- 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 cellular quantity and proceed after verification with OTP.
- Choose the Evaluation 12 months (2024-25 for present situation) and select āAdvance Tax (100)ā below Sort of Cost.
- 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 Cost:
- Obtain Challan 280 type from the Earnings Tax Division web site.
- Fill the challan with particulars like your PAN, evaluation yr, tax sort (100 for Advance Tax).
- Point out the installment quantity (depends upon the due date).
- Submit the finished challan at any financial institution licensed to gather tax funds.
Extra Ideas:
- 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 could be paid by submitting a Tax Cost 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 Cost Challans. Alternatively, people may pay Advance Tax on-line by means of the Earnings Tax Dept / NSDL web site. e-Cost 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 Licensed Banks.
Video on The best way 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 exhibiting 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 means of Challan 280 what subsequent? Is your accountability over. No. You want to present the tax paid in your ITR,Ā When you have paid Advance/ Self Evaluation tax by means of Challan 280 fill within the particulars in Tax paid and guarantee 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 under.
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Do you pay Advance Tax?
