Advance Tax : Everything you need to know


(Last Updated On: December 7, 2019)

It’s that time of year when you hear the “Advance Tax” related what, when, how questions  from your friends, colleagues and across the media. It’s very important to know everything about advance tax to avoid high amount of interest.

First of all, let’s understand 

What is Advance Tax ? 

It is a tax which you pay in advance in the same year in which you earn income. Since you pay, during the course of your earnings, it is also named as “Pay as You Earn” tax.The good part is that you need to pay it in installments throughout the year and not in the lump sum.


Who is required to pay Advance Tax ?

Every assessee whose estimated tax liability is Rs. 10,000/- or more after deducting TDS/TCS & MAT credit, then advance tax liability will arise.

Example

Particular

Amount

Total estimated tax liability for FY 2019-20

Rs. 65,000

Total TDS deducted 

Rs. 60,000

Tax liability after TDS

Rs. 5,000

 In the above case, since total estimated tax liability exceeds Rs. 10,000/- but estimated tax liability after deducting TDS is less than Rs. 10,000/- then he is not liable to pay advance tax.


Who is not required to pay Advance Tax ?

There is an exception to the payment of Advance Tax in case following all conditions satisfies :

  • Assessee is a senior citizen
  • He is a resident of India and
  • He is not having any income from business or profession.

What is the due date of payment of Advance Tax ?

You are required to pay the advance tax in installments instead of lump-sum.There are different due dates for paying the different installments over the year. Previously (upto FY 2015-16), the due dates & percent of advance tax were different for corporate taxpayers and individual taxpayers. But afterwards, both categories of taxpayers have been brought at par. 

The due dates of payment of advance tax for all assessee are given below :

DUE DATE OF PAYMENT OF ADVANCE TAX

Due Date of payment of Advance Tax

Amount of advance tax ( For ALL assessee)

On or before June 15

Up to 15% of advance tax liability

On or before September 15

Up to 45% of advance tax liability

On or before December 15

Up to 75% of advance tax liability

On or before March 15

Up to 100% of advance tax liability


What is the due date of payment of Advance Tax  for individuals opting presumptive taxation scheme u/s 44AD/44ADA?

DUE DATE OF PAYMENT OF ADVANCE TAX

Due Date of payment of Advance Tax

Amount of advance tax (Individual opting section 44AD/44ADA)

On or before March 15

Up to 100% of advance tax liability

Taxpayers covered under the presumptive scheme are required to pay the whole of tax at once before 15th March. Thus, persons who are opting for 44AD or 44ADA need not to pay the advance tax in 4 installments i.e. need to pay in one installment only in the month of March [For FY 2019-20, due date is 15-03-2020]


Do I need to pay Advance tax on Capital Gain Income, Winnings, dividend u/s 115BBDA and PGBP income accure first time ?

Assessee is not able to estimate capital gain, winnings, PGBP income accrue first time or dividend u/s 115BBDA therefore advance tax on such income shall be paid in remaining installment by assessee after receipt of such income.When no installment is due, then pay by 31st March of the relevant financial year to avoid the interest.

Let’s understand Advance Tax, with the help of an example:

Let’s say, Mr. Gupta, aged 45 years, salaried person. The estimated tax liability of Mr. Gupta shall amount to Rs. 3,00,000.The amount deducted by way of TDS is Rs.2,00,000. In this case, Mr. Gupta is liable to pay advance tax as his tax liability is more than Rs. 10,000. Thus, he is required to pay the amount of advance tax in the following manner:


How Advance Tax Liability is calculated?

Due Date

Advance Tax Liability Payable 

Advance Tax Payable(Rs.)

Amount Already Paid(Rs.)

Balance To Be Paid

June

15%

1,00,000 x 15%=15,000

Nil

15,000

September

45%

1,00,000 x 45% =45,000

15,000

30,000

December 

75%

1,00,000 x 75% = 75,000

45,000

30,000

March

100 %

1,00,000 x 100% = 1,00,000

75,000

25,000

Total Amount Paid

 

1,00,000

It is also important to know that for calculating your advance tax liability, you have to only estimate your total income for the year.Do keep in mind the income you receive, the tax deducted at source and the investments you make. The tax is then calculated on this estimated total income.You don’t need to prove your projections to the Income Tax Department!

The steps are under:

  1. Estimate your total income from all sources earned from 1 April- 31st March.
  2. Subtract the total tax-deductible expenses/investments.
  3. Compute tax on such Income.
  4. Reduce the amount of tax paid by way of TDS/TCS.

What you get is your advance tax liability. Now you need to pay advance tax in installments as discussed in the previous answer.


How to make the payment of Advance Tax ?

Now that you have calculated your advance tax liability, its time to pay.You can pay advance tax online by following five simple steps-

  1. Login to http://www.tin-nsdl.com > Services > e-payment : Pay Taxes Online or click here.
  2. Select the relevant challan i.e. ITNS 280.
  3. Enter PAN and other mandatory challan details like, the address of the taxpayer and the bank through which payment is to be made etc. Select code 100 under “Type of Payment”.Select Assessment Year carefully.
  4. On submission, a confirmation screen will be displayed & you will be directed to the net-banking site of the bank.
  5. Login to the site id/password provided by the bank and enter payment details.On successful payment, a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made.

How will I verify the “Advance Tax Paid” to the Income Tax Department?

For this, after you make the payment go and check whether the amount is reflected in your 26 AS. This can be done by log-in to your income tax department account. You can Login to your bank’s website and click on the option view Form 26AS.

Normally, it takes 5-7 days to update on 26AS.


What if I don’t pay Advance Tax?

In case, you do not pay the advance tax correctly and on time you will be liable to pay interest.An amount of interest shall be charged from you under sections 234 B and 234 C as the case may be.If you have correctly paid your 100% dues on or before 15th March, then you are not required to pay any more tax at the time of filing of the return.The advance tax paid gets adjusted against the total tax liability. But, if the total advance tax paid is less than the total tax liability, then the balance amount of tax is to be paid along with interest.


Frequently Asked Questions 

Q. How do I show the amount of Advance Tax Paid while filing my ITR ?

At the time of filing ITR, enter the amount of Advance Tax alongside TDS in the Prepaid Taxes section of ITR form.

Q. Does a Non-resident senior citizen having interest income requires to pay Advance Tax ?

Yes, only resident senior citizen not having business and profession income are out from the advance tax liability.

Q. Will tax payment made after 15 March but before 31 March be considered advance tax or self assessment tax?

Tax paid upto 31st March is considered as advance tax but subject to interest.

Q. Which challan is used for payment of advance tax ?

Challan 280 is required to use for advance tax payment.

Q. Does advance tax liability arise in case of NRI also ?

Yes, if estimated tax liability exceeds Rs. 10,000/-

We hope all your answers have been answered. In case, you still have any queries or need assistance, we are here at your service! Feel free to contact us at [email protected]

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.