Advance Tax

What is Advance Tax?

Advance Tax is a system where taxpayers pay their taxes in installments instead of a lump sum at the end of the financial year. It is also called the "pay-as-you-earn" tax and applies to individuals, businesses, and professionals whose total tax liability exceeds ₹10,000 in a financial year.

Who Should Pay Advance Tax?

Advance tax applies to:

1. Salaried individuals with additional income from capital gains, rent, interest, etc.
2. Self-employed professionals such as doctors, lawyers, freelancers, and consultants.
3. Businesses that generate taxable income.
4. Companies including startups and corporations.
5. Individuals earning from investments like stock trading, mutual funds, and real estate.

Advance Tax Due Dates for FY 2024-25

For businesses opting for presumptive taxation under Section 44AD or 44ADA, the entire advance tax is payable by 15th March 2025.

How to Calculate Advance Tax?

1. Estimate your total income from salary, business, rent, capital gains, etc.
2. Deduct expenses allowed under tax laws.
3. Apply the applicable income tax slab rates.
4. Deduct TDS already paid.
5. If the remaining tax liability exceeds ₹10,000, pay advance tax as per the schedule.

How to Pay Advance Tax?

You can pay advance tax online through the Income Tax e-filing portal:

1. Visit https://www.incometax.gov.in.
2. Click on "e-Pay Tax" and log in.
3. Select "Challan No./ITNS 280" for advance tax payment.
4. Choose "Advance Tax (100)" under tax payment type.
5. Enter your details, calculate tax, and pay through net banking, debit card, or UPI.
6. Save the challan receipt for future reference.

Penalty for Non-Payment of Advance Tax

If you fail to pay or underpay advance tax, interest is levied under Section 234B and 234C:

• Section 234B: 1% per month if 90% of total tax is not paid before 31st March.
• Section 234C: 1% per month for delay in installment payments.

Exemptions from Advance Tax

Advance tax is not required if:

1. Your total tax liability after TDS is less than ₹10,000.
2. You are a senior citizen (aged 60+) without business income.
3. Your income consists only of salary, and your employer deducts TDS.

Conclusion

Advance tax helps avoid last-minute tax burdens and penalties. Timely payments ensure compliance and prevent unnecessary interest charges. If you have multiple income sources, plan your taxes in advance to avoid surprises at the end of the year.