If you are a salaried individual or professional, or even run a business, and your total tax liability is Rs 10,000 or more in the financial year, then remember the date, June 15. That is the due date for paying the first instalment of advance tax for this financial year.
What is Advance Tax?
Advance tax means income tax that should be paid in advance instead of lump sum payment at the year end. It is also known as pay as you earn tax. These payments have to be made in instalments as per the due dates provided by the income tax department.
Who Should Pay Advance Tax?
Salaried, freelancers, and businesses – If their total tax liability is Rs 10,000 or more in a financial year, have to pay advance tax. The advance tax applies to all taxpayers, salaried, freelancers, and businesses.
Income tax law requires the taxpayer to discharge their tax liability in advance by way of advance tax before filing the tax return. Advance tax is required to be paid in four instalments during the relevant financial year as under:
| Due date of instalment payable on or before | Amount payable as a % of tax payable (after deducting TDS/TCS credit, MAT credit, foreign tax credit) |
| June 15 | 15% |
| September 15 | 45% less advance tax paid in earlier instalment |
| December 15 | 75% less advance tax paid in earlier installment |
| March 15 | Balance Tax |
No advance tax needs to be paid by senior citizens (aged above 60 years or more during the financial year) if he/she does not have income under the head “profit and gains of business or profession”.
Also, where the taxpayer is computing income on presumptive basis under specific provisions of the income tax law, advance tax is required to be paid in single instalment on or before March 15 every financial year.
If the advance tax is not paid, or is paid short, or is paid after the due date, then the taxpayer would be liable to pay dual interest at the rate of one per cent per month on the amount of tax to be paid.
For computing advance tax, the taxpayer is required to estimate the annual taxable income and the tax payable thereon.
“While computing annual taxable income, the taxpayer needs to ensure (a) that all the income is correctly estimated and the deductions allowable under the tax laws are correctly taken (b) the TDS/TCS credit are verified with form 26AS while computing tax liability to ensure that the advance tax is correctly paid to avoid any interest consequences,” says Anita Basrur, partner, direct tax, Sudit K Parekh & Company, LLP.
