How to Calculate and Pay Advance Tax

Advance Tax

As per section 208 of Income Tax Act, 1961, every person whose estimated tax liability for a financial year is ₹10,000.00 or more, shall pay his tax in advance, in the form of ‘Advance Tax’.

Person not Liable to Pay Advance Tax

As discussed above, every person whose estimated tax liability for a financial year is ₹10,000.00 or more is liable to pay advance tax. However, following persons are not liable to pay advance tax even if their tax liability is ₹10,000.00 or more:

  • A taxpayer opting for the presumptive taxation scheme of section 44AD will not be liable to pay advance tax in respect of business for which the presumptive taxation scheme of section 44AD is adopted.
  • A resident senior citizen not having any income from business or profession is not liable to pay advance tax.

Due Dates for Payment of Advance Tax

Advance tax is to be paid in different instalments. The due dates for payment of different instalments of advance tax are as follows.

StatusBy 15th JuneBy 15th Sept.By 15th Dec.By 15th March
Noncorporate taxpayersNilUp to 30 of advance taxUp to 60% of advance taxup to 100% of advance tax
Corporate taxpayersUp to 15% advance taxUp to 45% of advance taxUp to 75% of advance taxUp to 100% of advance tax

Note:

  • Any tax paid till 31st March will be treated as advance tax.
  • If the last day for payment of any instalment of advance tax is a day on which the banks are closed, then the taxpayer should pay the advance tax on the immediately following working day.

Mode of Payment of Advance Tax

As per Rule 125 of the Income-tax Rules, 1962 a corporate taxpayer (company) shall pay taxes through electronic payment mode using the internet banking facility of the authorised banks.

Taxpayers other than a company, who are required to get their accounts audited, shall pay taxes through the electronic payment mode using the internet banking facility of the authorised banks.

Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. by depositing the challan at the receiving bank.

Payment of Advance Tax

Advance tax can be paid by the taxpayer either on his own account or in pursuance of an order of the Assessing Officer.

The taxpayer who is liable to pay advance tax is required to estimate his current income and pay advance tax on his own account. In such a case, he is not required to submit any estimate or statement of income to the tax authorities.

After making payment of a first or second instalment of the tax (as the case may be). if there is a change in the tax liability, then the taxpayer can revise the quantum of advance tax in the remaining instalment(s) and pay the tax as per revised estimates.

Tax can be computed on the current income (estimated by the taxpayer) at the rates in force during the financial year. From the tax so computed, tax deducted or collected at source will be deducted and the balance tax payable will be used to compute the tax liability. Also, relief of tax allowed under section or section 90A or any deduction under section 91 or any tax credit allowed to be set off as per section 115JAA or section 115JD shall also be deducted while computing the tax liability.

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