Think you can skip advance tax? Think again
What's the story
Imagine paying your taxes in bite-sized chunks throughout the year instead of a hefty sum all at once.
Sounds like a financial game-changer, right?
Welcome to the world of advance tax payments in India!
By spreading out your tax liability into manageable installments, you can avoid the last-minute stress and keep your finances on track.
For those who expect to owe more than ₹10,000, it's not just a choice—it's a requirement!
Here's why advance tax is the smartest way.
Eligibility
Who needs to pay advance tax?
All taxpayers, including salaried individuals, freelancers, and businesses, are subject to advance tax if their total tax liability before TDS (Tax Deducted at Source) exceeds ₹10,000 in a financial year.
And, it is not limited to individuals with business income. Even if you have income from capital gains on shares or house property, you are liable to pay advance tax.
Payment schedule
How and when to pay
The payment of advance tax is divided into four installments within the financial year: June 15 (15% of the estimated liability), September 15 (45% cumulatively), December 15 (75% cumulatively), and March 15 (100%).
You can pay online through the Income Tax Department's website or by physically depositing challans at authorized banks.
Calculation
Calculating your advance tax
To compute your advance tax liabilities, first project your total income for the financial year. Then apply the prevailing income tax rates to calculate your gross tax liability.
Subtract any TDS that may have been deducted from your income sources during the year.
Whatever balance remains, that is what you need to pay as advance tax.
Penalties
Consequences of non-payment
Failing to pay advance tax attracts interest penalties under sections 234B and 234C of the Income Tax Act.
Section 234B pertains to interest for non-payment or late payment of advance tax, whereas 234C deals with installment deferments.
The interest is computed at 1% per month or part of a month on the owed amounts.
Familiarity with these rules aids in effective tax planning and penalty avoidance.