Advance Tax – Who Needs to Pay And How?

Advance Tax Installments Chart

Advance Tax, as the name suggests is the tax that you pay to the Income Tax Department in ‘advance’ i.e., in the same financial year in which you earn the income. Hence it is also called as ‘Pay as you earn’ scheme of income tax. Let’s learn more about the Advance Tax.

Who needs to pay?

Advance tax theoretically needs to be paid by everyone with income tax liability of more than Rs.10,000. This means that if you estimate that your tax liability in a financial year is going to be over Rs.10,000/- then you should pay the advance tax in installments. However if you are a salaried employee, your employer deducts TDS on your income from salary regularly and pays it to the income tax department. Hence salaried people need not pay advance tax on their salaried income. However if a salaried individual receives income from sources other than salary like from fixed deposits, capital gains from sale of any immovable property or equity shares etc., he/she needs to pay the advance tax on such income.

When to pay?

Advance tax needs to be paid in the following installments (for AY 2018-19 onwards)

Individuals / Corporate assessees:

Due Date Advance tax to be paid
June 15 Minimum 15% of the total advance tax liability
September 15 Minimum 45% of the total advance tax liability
December 15 Minimum 75% of the total advance tax liability
March 15 100% of the total advance tax liability

The above installments are to be followed by all the income tax payers except those who opt for presumptive income method where the business is presumed at 8% of the total turnover if it is less than Rs. 2 crore as per section 44AD of the income tax act. The same has been extended to professionals such as lawyers, architects, doctors etc., with gross receipts less than Rs.50 lakh (section 44ADA). Such assessees can at one go pay the full advance tax on or before March 31st of the financial year. Please note that these due dates are different from the regular due dates for filing / efiling of income tax.

How to Pay?

Advance tax can be paid through bank challan or from online using TIN-NSDL website. ITNS 280 is the challan through which the advance tax payment can be made.

Advance Tax e-Payment Online

You need to select ITNS 280, choose type of payment as: 100 – Advance tax and proceed with the payment of the advance tax.

Penalty for default or deferred payment of advance tax:

If you are liable to pay advance tax and fails to do so in any installment or falls short of total payment of advance tax, you will need to pay interest under sections 234B and 234C of the Income Tax Act. Hence it is advisable that you compute your Advance Tax liability well in advance on estimation basis and pay the installments due before the respective due dates. Don’t worry if you end up paying more than that what is your liability, because department will be giving back all the excess amount paid as advance tax as refund along with interest of 6%.

Should you have any questions regarding the advance tax payment, please shoot them in the comments section below.

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