Written by admin• December 28, 2023• 9:16 am• Payroll Management

Advance Tax – Calculation & How to Pay Advance Tax Online?

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Advance tax payment is a system where taxpayers can spread their tax obligations by making payments in multiple instalments throughout the fiscal year rather than settling the entire amount in one go. It is often considered a tax EMI. This method reduces immediate financial burdens and streamlines filing for income tax returns (ITR). This article covers everything about Advance Tax- from the basics, like its definition and payees, to the nitty-gritty in the form of rules and regulations. Read on to discover more.

What is Advance Tax?

Advance tax is the income tax a taxpayer pays in advance instead of making a lump sum payment at the end of a fiscal year. It is a tax that an individual pays as they earn. An individual can pay the tax amount in instalments per the due dates given by the Income Tax Department.

Who pays Advance Tax?

Advance Tax is paid when:

If the total tax liability of an individual is more than Rs. 10,000 in a fiscal year, advance tax has to be paid. Advance tax applies to all taxpayers, salaried employees, freelancers, and businesses.
Taxpayers opting for the presumptive scheme under section 44AD must make a single instalment payment for their advance tax by March 15. They also have the option to settle all their tax obligations by March 31.
Professionals like doctors, lawyers, architects, and others fall under the presumptive scheme per section 44ADA. They must clear their entire advance tax obligation in a single instalment by March 15. They can also settle the total amount by March 31.
Non-resident individuals and foreign corporations that generate income in India must obey advance tax obligations when their tax liability exceeds Rs. 10,000.
Certain businesses, like lottery and horse racing, must pay advance tax on specified incomes, regardless of whether they exceed Rs. 10,000.
Individuals who only earn salary income and do not have any additional income sources are generally not liable to pay advance tax.
Only senior citizens (60 years or older) with business income must pay advance tax.

Advance Tax Due Dates For FY 2023-24

The due date to pay the final instalment for advance tax for Financial Year 2023-24 is March 15, 2024. Taxpayers have to pay 100% of their tax liability by this date.

Advance Tax Payment for Companies

Due Date of Tax Instalments	Amount of Tax Payable
On or before June 15, 2023	15%
On or before September 15, 2023	45%
On or before December 15, 2023	75%
On or before March 15, 2024	100%

Advance Tax Payment for Business Owners and Self-employed

Due Date of Tax Instalment	Amount of Tax Payable
On or before September 15, 2023	30%
On or before December 15, 2023	60%
On or before March 15, 2024	100%

Advance Tax Payment for Businesses and Professionals opting for presumptive taxation scheme under Section 44AD/44ADA

Due Date	Amount of advance tax
On or before March 15, 2024	100% of advance tax

Advance Tax Calculation

You can calculate advance tax by following the steps given below:

When determining your advance tax calculations, calculate the total income from all sources received between April 1 and March 31 for the relevant financial year.
Make all eligible deductions and exemptions.
Calculate the tax payable by applying the income tax slab applicable to you.
Decrease the tax amount deducted through TDS/TCS.

After calculating your advance tax liability (if the amount is more than Rs. 10000), you can pay advance tax in instalments, as discussed in the previous section.

How to pay Advance Tax online?

Advance Tax can be paid online through the online facility of the Income Tax department. The following steps can help you make a payment for advance tax online:

Visit the official website of the Income Tax Department of India click here.
Click on the ‘e-pay’ option tax on the left side under ‘Quick Links’.
Enter your ‘PAN’ and ‘Mobile Number’.
Enter the ‘OTP’ you receive on your mobile and click ‘Continue’.
Select the ‘Income Tax’ option and click ‘Proceed’.
Select the Assessment Year for which you want to pay advance tax, select the payment type as advance tax from various options, then click ‘Continue’.
Feed the amount of tax to be paid in the tax category and click ‘Continue’.
After payment, you will get a challan for your reference and ITR Filing.

Advance Tax Late Payment Interest

Taxpayers should make advance tax payments within the four deadlines of that fiscal year. If the advance tax payment is not timely, then interest is liable to be paid.

Non-payment of advance tax attracts interest under 234B: According to Section 234B, paying a minimum of 90% of total tax liability as advance tax by March 31 is essential—failure to make payments results in a charge of 1% interest on the unpaid amount.
Late payment of advance tax attracts interest under 234C:

Particulars	Rate of Interest	Period of Interest	Amount on which Interest is Calculated
If Advance Tax paid on or before June 15 is less than 15%	1% per month	Three months	15% of Amount ( – ) tax paid before June 15
If Advance Tax paid on or before September 15 is less than 45%	1% per month	Three months	45% of Amount ( – ) tax paid before September 15
If Advance Tax paid on or before December 15 is less than 75%	1% per month	Three months	75% of Amount ( – ) tax paid before December 15
If Advance Tax paid on or before March 15 is less than 100%	1% per month	One month	100% of Amount ( – ) tax paid before March 15

Exemptions under Advance Tax

The exemptions under advance tax are as follows:

Senior citizens aged 60 years and above are exempt from paying the advance tax.
Salaried individuals who fall under the TDS net are exempt from paying the advance tax. However, earnings from income sources such as interest, capital gains, and rent will attract advance tax.
If the TDS deducted is more than the tax payable for the year, then you do not have to pay the advance tax.

Benefits of paying Advance Tax

The benefits of paying advance tax are as follows:

When taxpayers pay their taxes in advance, they can avoid concerns about monetary shortages or scrambling for last-minute tax payments.
It helps speed up the collection of taxes.
Advance tax payment saves people from defaulting on their tax payments.
It aids businesses in effectively managing their finances and offers insight into their income for the year.
The government can earn an interest on the collected amount, increasing government funds.

Refund on Advance Tax

You can get a refund on advance tax payment for the following reasons:

At the end of the year, if the Income Tax Department finds out you have paid more tax than you should have, it will refund the excess amount.
Taxpayers can claim a refund by submitting Form 30. They have to claim within one year from the last year of the assessment year.

Advance Tax Challan 280

Challan 280 allows people to pay income tax online on the website of the Income Tax Department of India. On the website, people must select this challan, fill out the form and then use it to pay taxes online/in the office. The prerequisites of Challan 280 are as follows:

PAN Details: It is essential to provide the correct PAN details. Failure to do so risks your tax being deposited in someone else’s name.
Assessment Year: Choose the valid assessment years for which you will pay your tax because the tax is going out in advance for the following fiscal year.
Selecting the Payment Type: The taxpayer must choose the payment type in the form. If you pay for the same financial year based on estimated income, it will be advance tax. On the other hand, if you pay after the completion of the financial year, it is considered a self-assessment tax.

Example of Advance Tax

Jyoti works in a company and also works as a freelancer. Her earnings from her salary are Rs. 10 lakh before providing the benefit of any deductions or exemptions. Her net receipts (after giving the use of expenses) from her freelance work are around Rs.10 lakh. She is investing Rs. 1.5 lakh in PPF and paying Rs. 25,000 as her medical insurance. She is also getting Rs. 15,000 as interest on her fixed deposits. Her employer has deducted a TDS of Rs. 1,00,000 from her salary. So, the final calculation and advance tax liability are as follows:

Income Estimate	Amount In Rs.	Amount In Rs.
Income from Salary:
Income	10,00,000
Less: Standard deduction	50,000
Income from Salary:		9,50,000
Income from Profession:		10,00,000
Income from other source:		15,000
Gross Total Income		19,65,000
Deductions under Chapter VIA
80C:	1,50,000
80D:	25,000
Total Deductions		1,75,000
Total Income		17,90,000
Tax Payable as per OLD Regime		3,49,500
Education cess		13,980
Total tax Liability		3,63,480
TDS deducted		1,00,000
Tax Payable as advance Tax		2,63,480

Due date	Advance Tax Payable	Advance tax
June 15	15% of advance tax liability	39,522
September 15	45% of Advance tax liability	79,044
December 15	75% of Advance Tax Liability	79,044
March 15	100% of Advance Tax Liability	65,870

Conclusion

Understanding and proactively managing advance tax obligations can pave the way for individuals and businesses financial stability and peace of mind. By spreading tax liabilities across the fiscal year, taxpayers can mitigate the strain of hefty lump-sum tax payments, ensuring smoother cash flow and better financial planning.

Furthermore, advance tax calculations offer invaluable insights. They facilitate informed decision-making and provide a comprehensive view of earnings and financial health. Whether you’re a freelancer, a professional, or a business owner, embracing the principles of advance tax can be a game-changer.

While advance tax might seem daunting at first glance, it is a testament to prudent financial planning and responsible citizenship. With this knowledge, you’re better equipped to confidently navigate the tax landscape, ensuring compliance and financial well-being.

Remember, knowledge isn’t just power in taxation—it’s peace of mind. Here’s to making informed decisions, optimising resources, and embracing the journey towards fiscal responsibility with assurance.