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How to calculate and pay Advance Tax

How to calculate and pay Advance Tax

What is Advance Tax?

Advance Tax is part payment of one’s tax liability before the end of the fiscal year i.e. 31 March. The provisions of the Income tax act make it obligatory for every individual, salaried/ self-employed professional, businessman and corporate to pay Advance Tax, on any income on which TDS is not paid.

Do I need to pay Advance Tax?
An individual is liable to pay advance tax if he has income from interest, commission, rent, business or profession, etc, on which no tax has been deducted at source (or tax has been deducted at a lower rate). Advance tax liability arises where the balance tax liability is Rs 10,000/- or more.

If you are salaried person with only salary as the sole source of income, Advance Tax would not be applicable as tax deducted at source would be taken care of by your employer. If you have other sources of income, such as, income from capital gains, shares and mutual funds, income from house property, etc.; Advance Tax is mandatory.

How to calculate Advance Tax
While calculating Advance Tax payable, a taxpayer needs to make only a projection or estimate of his income, as the actual income could be calculated only by the fiscal year end.

– Using the projected income for the fiscal year, the tax payable is to be calculated as per the tax slabs applicable for the current financial year.
– From the tax so computed, subtract the tax deducted at source, if any.
– Include educational cess while calculating advance tax.
– The amount arrived at is the advance tax payable, in instalments.

When do I have to pay Advance Tax?
For Non-Corporate Assessee- Individuals
•    On or before 15 September – not less than 30% of tax payable
•    On or before 15 December – not less than 60% of tax payable
•    On or before 15 March – not less than 100% of tax payable
Which means that if your income tax liability for a year is Rs 1,00,000/- then you should pay advance tax of Rs 30,000 by 15 September, another Rs 30,000 by 15 December and rest Rs 40,000 by the end of 15 March.

What is the penalty if I don’t pay Advance Tax?
If during the year, you have not paid advance tax instalments or have paid lesser than the percentage specified, you will be required to pay interest of 1% per month under section 234C of the IT Act. If you have not paid any advance tax during the year or advance tax paid was less than 90%, then you will be liable to an additional interest of 1% per month under section 234B of the IT Act.

Penalty under Section 234C
In case if you don’t pay your due advance tax installment in time then you will be charged a simple interest of 1% for the next 3 months on the amount of shortfall,this penalty is purely due to the delay in paying the due advance tax amount.

Penalty under Section 234B
If the total advance tax paid on the last due date i.e. 15 March is less than 90% of your total advance tax liability then you will be charged an interest rate of 1% on the balance amount for every month till the time you complete the payment. It means let’s say if your total income tax liability is Rs 1,00,000/- and if you have not paid anything on or before 15 March then you would be charged 1% on the entire outstanding balance of Rs 1 lakh in this case each month, unless you pay it, so if you pay in June, then you will be charged for 3 months penalty and it would be Rs 3,000 in total other than penalty under sec 234C.

How to Pay Advance Tax
You can pay Advance Tax as per the following process:-
– Challan no ITNS 280 should be filled out with all the correct details of the taxpayer
– The filled challan along with amount should be submitted to any bank accepting tax payments.
–  Keeping in view your convenience, you can also pay tax online through any bank facilitating e-payment of taxes.

In case you have missed out on the earlier two due dates and have not paid your due advance tax, then please do it right away as it is just a click away!


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