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Advance Tax: Particulars,What, How, Why

If the overall tax payable in a monetary 12 months is Rs. 10000 or extra, then an individual has to pay Advance tax. Advance tax means earnings tax needs to be paid prematurely as an alternative of lump sum cost at year-end. You pay this tax within the monetary 12 months previous the evaluation 12 months in 4 installments and the due dates are 15 June, 15 September, 15 December and 15 March. All of the taxpayers are coated by the advance tax. For salaried individuals, TDS is deducted by the employer from wage however if in case you have sources of earnings like curiosity on deposits and your tax legal responsibility for the 12 months exceeds Rs 10,000 after your employer has deducted the TDS then you need to pay Advance Tax. Senior citizen (age of 60 years or extra) who isn’t working a enterprise is exempted (from Finances 2012). This text is all about Advance Tax for people.

On this world nothing is for certain however demise and taxes mentioned Benjamin Franklin

(Founding father of USA and face on America’s  100 greenback invoice/observe).

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 12 months through which earnings is obtained. It’s also referred to as as “Pay as you Earn” scheme because you pay the tax in the identical 12 months through which you earn earnings.

In case you are a Salaried worker and have earnings apart from earnings from wage then it is best to verify Advance Tax.

In case you are Freelancer, Professionals, companies, YouTuber, Blogger then you need to know and pay Advance Tax

  •  In the event you estimate that you’ll owe greater than Rs.10,000 on March 31  in taxes (after deducting TDS) then it is best to pay advance tax.
  • You pay this tax in 4 installments and the due dates with Share of Advance Tax to be paid are 15 June(15%), 15 September(45%), 15 December(75%) and 15 March(100%).
  • If the Revenue Tax isn’t payable as per the above schedule, Curiosity is liable to be paid for late cost of tax as follows
    • Curiosity beneath part 234B @ 1% per thirty days
    • Curiosity beneath part 234C  @ 1% per thirty days is payable if 90% of the tax isn’t paid earlier than the top of the monetary 12 months
  • Advance Tax could be paid by submitting a Tax Cost Challan,ITNS 280.Challan
    • Tax relevant: For particular person Choose 0021 : INCOME-TAX (OTHER THAN COMPANIES)
    • Kind of Cost: Kind of cost will depend on why you might be paying earnings tax. Enter 100 for Advance Tax.
  • You need to declare Advance Tax whereas submitting Revenue Tax Return ITR

Who has to pay Advance Tax?

The provisions of the Revenue 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) isn’t paid. Each people, in addition to corporates, should pay this tax.

Advance Tax for Salaried Worker

If a person’s 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 cost. The tax deducted will likely be made accessible to the worker by the employer in Kind 16.

However when a Salaried worker has earnings apart from earnings from wage then he has to fret about Advance Tax. Ex earnings from different sources comparable to curiosity gained (on saving checking account), capital beneficial properties, 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  in taxes (after deducting TDS) then it is best to pay advance tax.

Freelancers, Professionals, companies, YouTuber

Presumptive earnings for Professionals: Impartial professionals comparable to medical doctors, attorneys, architects, and so on. come beneath the presumptive scheme beneath part 44ADA. They should pay the entire of their advance tax legal responsibility in a single installment on or earlier than 15 March. They’ll additionally pay the total tax due by 31 March.

Presumptive earnings for Companies: The taxpayers who’ve opted for a presumptive taxation scheme beneath part 44AD should pay the entire quantity of their advance tax in a single installment on or earlier than 15 March. Additionally they have an choice to pay all of their tax dues by 31 March.

Who doesn’t should pay Advance Tax?

Advance Tax is NOT relevant when

  • A senior citizen (the resident particular person who’s 60 yrs or extra) who do not need any earnings from enterprise & career, doesn’t should pay advance tax. This alteration was launched from AY 2013-14. Extra particulars at Senior Citizen : Revenue and Tax
  •  If one adopts presumptive taxation then one has to declare earnings on the prescribed charge and no different deductions are allowed. One has to pay all the advance tax by 15 March. That is relevant for 

How you can discover if you need to pay advance tax

As we all know there are 5 varieties of Revenue, Revenue from Wage, Revenue from Home Property(Any residential or industrial property that you just personal will likely be taxed), Revenue from Capital Positive factors (If you promote Mutual Funds, Shares, Bond, Gold, Land or Property, Revenue from Income and Positive factors of Enterprise or Occupation & Revenue from Different Sources. Particulars in our article Perceive Revenue Tax

For advance tax verify

  • Revenue from Home Property: When you’ve got rental earnings.
  • Revenue from Capital Positive factors: Have you ever offered Mutual Funds, Shares, Bond, Gold, Land, or Property.  Tax labeled as Lengthy Time period Capital Achieve Tax(LTCG) and Quick Time period Capital Achieve(STCG) relies on the asset you offered, the time interval you owned the asset. Particulars in our article Capital Achieve Calculator on Sale on Property, Mutual Funds, Gold, Shares
  • Revenue from Income and Positive factors of Enterprise or Occupation: The earnings chargeable to tax is the distinction between the credit obtained on working the enterprise and bills incurred.
  •  Revenue from Different sources: Verify the following earnings. Particulars in our article Revenue From Different Sources
    • the curiosity of Saving Financial institution Account,
    • Curiosity from Mounted Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS) and so on
    • Curiosity from Revenue Tax Refund
    • Household Pension
    • Dividend Revenue: Dividend obtained on or after 1 April 2020 is taxable within the arms of the investor/shareholder. Particulars in our article Dividend and Tax

What if we don’t pay Advance Tax?

If you need to pay advance tax and In the event you fail to pay your Advance Tax or, when you pay lower than the stipulated tax, you’ll be penalised and must pay additional beneath Sections 234A, 234B, 234C. So there isn’t any escaping Tax.  Because the Revenue Tax workplace says “Pay Tax Karo Calm down

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 isn’t paid, then the 1% could be on the defaulted quantity for a month, till the tax is totally paid.

Why Pay Advance Tax?

Advance tax is without doubt one of the main instruments utilized by the Govt. to gather tax from the 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 ‘Pay as You Earn Scheme’. This primarily goals at decreasing the last-moment hassles to an assessee for cost 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 rising funds to the federal government coffers.
why tax

How is advance Tax Calculated?

Advance tax is computed on earnings that a person may earn throughout the 12 months,  in that sense, it’s estimated earnings. The tax is calculated utilizing the charges relevant for the monetary 12 months.

Suppose after paying your first installment of tax on the estimated earnings, your precise earnings elevated on account of some shares/mutual funds you offered, You’ll need to revise your earnings and accordingly pay the differential within the subsequent installment.

Though Advance Tax is liable to be paid on all incomes together with Capital Positive factors, it’s tough to estimate the Capital Positive factors which can come up in an 12 months. Subsequently, in such instances, it’s supplied that if any such earnings arises after the due date of any installment, then, all the quantity of tax payable on such capital achieve (after claiming exemption beneath part 54) shall be paid in remaining installments of Capital Positive factors that are due. If all the quantity of tax payable is so paid, then no curiosity on late cost will likely be levied

Listed under are the steps to calculate advance tax:

  • Decide the Revenue: Decide the earnings you obtain apart from your wage. It’s vital to incorporate any ongoing agreements that may pay out later.
  • Minus the Bills: Deduct your bills from the earnings. You may deduct bills associated to your work (freelancing) comparable to lease of the work place, journey expense, web and telephone prices.
  • Complete the Revenue: Add up different earnings that you just may obtain within the type of lease, curiosity earnings, and so on. Deduct the TDS deducted out of your salaried earnings.
  • Complete Advance Tax: If the tax due exceeds Rs.10,000 then you definately’ll should pay advance tax.

Advance tax Charges and Dates

From FY 2016-17  For each particular person and company taxpayers

Due DateAdvance Tax Payable
On or earlier than fifteenth June15% of advance tax
On or earlier than fifteenth September45% of advance tax
On or earlier than fifteenth December75% of advance tax
On or earlier than fifteenth March100% of advance tax

Beneath are the dates and percentages earlier than FY 2016-17.

Due DateInstallment % of Advance Tax
fifteenth SeptemberUp-to 30%
fifteenth DecemberUp-to 60%
fifteenth MarchUp-to 100%

For instance, suppose your whole tax legal responsibility(after deducting TDS)  for this 12 months is Rs 1,00,000

So by fifteenth June you have to to pay 15% which involves Rs 15,000
So by fifteenth September you have to to pay 45% which involves Rs 45,00
By fifteenth December you’ll have to cowl 75%, so you have to to pay one other Rs 75,000.
By fifteenth March, 100% of advance tax involves Rs 100,000, you have to to pay one other Rs 25,000.

Penalty on not paying/paying much less Advance Tax: Sections 234A, 234B and 234C

In the event you owe greater than Rs.10,000(after deducting TDS) whereas submitting your returns, you’ll be penalized with  Curiosity beneath sections 234A , 234 B & 234 C

Below 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 also be calculated for 3 months @1% p.m and the ultimate instalment is calculated at a flat charge if 1% for 1 month solely.

Below part 234B, penalty arises when the overall quantity of advance tax paid together with the quantity of TDS is lower than 90% of the overall 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.

Below 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 out right here. Let’s have a look at these sections intimately.

Curiosity beneath part 234 C

234 C will likely be relevant when you don’t pay your advance taxes in common installments.  As per the Revenue Tax Act, you’re alleged 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. Let’s see it by way of some examples.

Mr. Khushal is working a clothes store. Tax Legal responsibility of Mr. Khushal is Rs 45,500. He has paid advance tax as given under:

Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September,  Rs. 12,000 on fifteenth December,  Rs. 14,500 on fifteenth March.  Is he liable to pay curiosity beneath part 234C, if sure, then how a lot?

Any tax paid until thirty first March will likely be handled as advance tax. Contemplating the above dates, the advance tax legal responsibility of Mr. Khushal at completely different installments will likely be as follows:

1) In first installment: Not lower than 15% of tax payable needs to be paid by fifteenth June. The tax legal responsibility is Rs. 45,500 and 15% of 45,500 quantities to Rs. 6,825. Therefore, he ought to pay Rs. 6,825 by 15thJune. He has paid Rs. 8,000, therefore, there isn’t any brief cost in case of first installment.

2) In second installment: Not lower than 45% of tax payable needs to be paid by 15thSeptember. Tax legal responsibility is Rs. 45,500 and 45% of 45,500 quantities to Rs. 20,475. Therefore, he ought to pay Rs. 20,475 by fifteenth September. He has paid Rs. 8,000 on fifteenth June and Rs. 11,000 on fifteenth September (i.e. whole of Rs. 19,000 is paid until 15thSeptember). There’s brief cost of Rs. 1,475 (i.e. Rs. 20,475 – Rs 19,000).

Although there’s brief cost of Rs. 1,475 however Mr. Khushal won’t be liable to pay curiosity beneath part 234C as a result of he has paid minimal of 36% of advance tax payable by fifteenth September. He has paid Rs. 19,000 until fifteenth September and 36% of 45,500 quantities to Rs. 16,380. Therefore, no curiosity shall be levied in case of deferment of second installment.

3) In third installment: Not lower than 75% of tax payable needs to be paid by fifteenth December. Tax legal responsibility is Rs. 45,500 and 75% of 45,500 quantities to Rs. 34,125. Therefore, he ought to pay Rs. 34,125 by fifteenth December. He has paid Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September and Rs. 12,000 on fifteenth December (i.e. whole of Rs. 31,000 is paid until 15thDecember). There’s a brief cost of Rs. 3,125 (i.e. Rs. 34,125 – Rs 31,000). Therefore, he will likely be liable to pay curiosity beneath part 234C on account of brief fall of Rs. 3,125 (*).

There’s a brief fall of Rs. 3,125 in case of third installment. On account of brief fall in case of third installment, curiosity beneath part 234C will be levied. Curiosity will likely be levied at 1% per thirty days or a part of the month on the brief paid quantity of Rs. 3,100 (i.e. Rs. 3,125 rounded off to Rs. 3,100 as per Rule 119A). Curiosity will likely be levied for a interval of three months. In different phrases, curiosity will likely be levied on Rs. 3,100 at 1% per thirty days for 3 months. Curiosity beneath part 234C will come to Rs. 93.

4) In final installment: 100% of tax payable needs to be paid by fifteenth March. The whole tax legal responsibility of Rs. 45,500 is paid by Mr. Khushal by fifteenth March (i.e. 8,000 on fifteenth June, Rs. 11,000 on15th September, Rs. 12,000 on fifteenth December and Rs 14,500 on fifteenth March). Therefore, there isn’t any brief cost in case of final installment. Thus, Mr. Khushal won’t be liable to pay curiosity beneath part 234C in case of final instalment.

Curiosity beneath part 234 B

234 B will likely be relevant when the overall advance tax paid is lower than  90 % Tax Payable.  This will likely be charged at 1% per thirty days until you pay your remaining taxes. Let’s work it out by way of an Instance:

Mr. Suraj is a businessman. His tax legal responsibility as decided beneath part 143(1) is Rs. 28,400. He has not paid any advance tax however there’s a TDS credit score of Rs. 10,000 in his account. He has paid the stability tax on thirty first July i.e. on the time of submitting the return of earnings. Will he be liable to pay curiosity beneath 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. 18,400 (i.e. Rs. 28,400 – Rs. 10,000) which exceeds Rs. 10,000 and therefore, he will likely be liable to pay advance tax. He has not paid any advance tax and therefore, he will likely be liable to pay curiosity beneath part 234B. Curiosity beneath part 234B will likely be levied at 1% per thirty days or a part of the month. In this case, Mr. Suraj has paid the excellent tax on thirty first July and therefore, curiosity beneath part 234B will likely be levied for the interval from 1st April to thirty first July i.e. for 4 months. Curiosity will likely be levied on unpaid tax legal responsibility of Rs. 18,400. Curiosity at 1% per thirty days on Rs. 18,400 for 4 months will come to Rs. 736.

In the event you pay our taxes in between April – July interval then curiosity @1% will likely be utilized solely on the stability tax payable .

On-line Advance Tax Calculators(Free)

If you wish to cross-check your advance tax or calculate I like to recommend Finotax.com:Detailed Calculator,reveals all steps. Test it out right here.

Video on Advance Tax

This 8:32 video explains Advance Tax.

This video talks about how you can Calculate Advance Tax

How you can pay advance Tax?

You may pay advance tax in India by way of two strategies: on-line or offline. Right here’s a breakdown of each:

On-line Cost:

  1. Go to the Revenue Tax Division’s e-payment web site: [income tax e payment ON Income Tax Department portal.incometax.gov.in]
  2. Enter your PAN and cell quantity and proceed after verification with OTP.
  3. Choose the Evaluation Yr (2024-25 for present situation) and select “Advance Tax (100)” beneath Kind of Cost.
  4. Fill within the challan particulars like State Code, circle code (refer web site for particulars).
  5. Select the cost methodology (internet banking or debit card) and your financial institution.
  6. Preview the challan for accuracy and click on “Pay Now” to finish the cost.

Offline Cost:

  1. Obtain Challan 280 kind from the Revenue Tax Division web site.
  2. Fill the challan with particulars like your PAN, evaluation 12 months, tax kind (100 for Advance Tax).
  3. Point out the installment quantity (will depend on the due date).
  4. Submit the finished challan at any financial institution licensed to gather tax funds.

Further Suggestions:

  • Use an advance tax calculator to estimate your tax legal responsibility for correct cost.
  • Make a copy of the challan (on-line cost 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 Revenue Tax Division. Branches of ICICI, HDFC and SBI settle for Advance Tax Cost Challans. Alternatively, people may pay Advance Tax on-line by way of the Revenue Tax Dept / NSDL web site. e-Cost facilitates cost 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 How you can Pay Advance Tax

Confirm Advance Tax in Kind 26AS

Half C of Kind 26AS has particulars of Tax Paid (apart from TDS or TCS). When you’ve got paid Advance Tax or Self Evaluation Tax it will seem on this part.  Please confirm that advance tax or self evaluation tax particulars are exhibiting up in Kind 26AS, In the event that they don’t match together with your particulars please contact the Financial institution.

Present Advance Tax in ITR

After paying earnings tax by way of Challan 280 what subsequent? Is your duty over. No. It’s worthwhile to present the tax paid in your ITR, When you’ve got paid Advance/ Self Evaluation tax by way of Challan 280 fill within the particulars in Tax paid and ensure that your tax legal responsibility is 0 earlier than submitting the return as defined for ITR1 in our article Fill Excel ITR1 Kind : Revenue, TDS, Advance Tax and proven in picture under.

Fill Self Assessment Details in ITRFill Self Assessment Details in ITR

Fill Self Evaluation Particulars in ITR

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All About Revenue Tax

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