It is obligatory to pay tax on every rupee you earned as income provided total income for a particular financial year exceeds the minimum income limit specified in the Income Tax Act, 1961 for various categories of assessee. Also, it is mandatory to pay tax in advance (in four installments) if your estimated tax liability is above Rs. 10,000.00 in a particular financial year. Advance Tax is part payment of one's tax liability before the end of the fiscal year, on 31st March. The provisions of the Income Tax Act make it obligatory for every individual, self-employed professional, businessman and corporate to pay Advance Tax, on any income on which TDS is not paid. So how much Advance Tax does one pay and what are its deadline?
Who Needs To Pay Advance Tax?
Advance Tax is to be paid on income which has not been subject to tax deduction at source, and where the tax liability is over and above Rs. 10,000 in a financial year. The tax that is calculated is paid in three or four installments depending upon the category the assessee belongs to. All individuals, corporate, self employed professionals, small scale businesses and HUF come under the purview of Advance Tax.
For individuals with employer salary as the sole source of income, Advance Tax would not be applicable as tax deducted at source would be taken care of by the employer. In case of other sources of income of an individual assessee, such as, income from capital gains, shares and mutual funds, lottery jackpot, income from house property, etc… Advance Tax is mandatory if the tax liability exceeds the stipulated amount of Rs. 10,000(Rupees Ten Thousand), in a single financial year.
Steps to Calculate Advance Tax
While calculating Advance Tax payable, assessee needs to make only a projection or estimate of his income, as the actual income could be calculated only by the fiscal year end.
1) Using the projected income for the fiscal year, the tax payable is to be calculated as per the tax slabs applicable for the current financial year.
2) From the tax so computed, subtract the tax deducted at source.
3) Include surcharge and educational cess while calculating advance tax.
4) The amount arrived at is the advance tax payable, in installments.
Deadlines for Advance Tax
The Income Tax Regulations have extended certain deadlines for payment of Advance Tax.
a) For Corporate Entities
| Date | Net Payable |
| By 15 June | Up to 15% of estimated tax payable |
| By 15 September | Up to 45% of estimated tax payable |
| By 15 December | Up to 75% of estimated tax payable |
| By 15 March | 100% Tax |
b) For Non Corporate Entities
| Date | Net Payable |
| By 15 September | Up to 30% of Estimated tax payable |
| By 15 December | Up to 60% of Estimated Tax payable |
| By 15 March | 100% Tax |
Penalties for Non Payment of Advance Tax
If you have failed to pay your Advance Tax or, if you have paid less than the stipulated percentage, you would be liable to pay a penal interest amount. This interest is calculated at 1% simple interest per month on the defaulted amount for three months. The interest penalty would continue up to the next deadline. If even after the last deadline of 15 March, the tax is not paid, then the 1% would be on the defaulted amount for every month, until the tax is fully paid.
In case the last day for payment of any installment is a holiday, the payment can be made on the next working day. In such a case, penal interest would not be applicable for the delay.
An individual is required to pay advance tax in three instalments as per Section 234C of the Act. So, if you have just realised that you have missed the December 15 timeline of the second instalment, you still have a chance. As per the provisions of the Act, you can discharge your balance advance tax liability by March 15 with interest of 1% per month. The interest will be calculated for six months if due taxes were not paid by September 15 and three months if taxes were not paid by December 15.
In Case of Excess Advance Tax Paid
In case the Advance Tax paid is a higher amount than the actual tax liability, then the excess amount is refunded back to the assessee. Also an interest of 6% on the excess amount is paid, if, the excess amount is 10% more than the actual tax.
Where to Pay Advance Tax
Advance Tax could be paid using a Tax Payment Challan at designated branches of banks empanelled with the Income Tax Department. Branches of ICICI, HDFC and SBI accept Advance Tax Payment Challans. Alternatively, individuals could pay Advance Tax online through the Income Tax Dept / NSDL website. https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp and use
CHALLAN NO. /ITNS 280
Note – This article is just for the general information of the readers, please contact your tax consultant or a Chartered Accountant for more information and proper guidance. Errors and omissions are expected
Best Regards
Prakash Nair
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