“On this world nothing is for certain however dying and taxes” stated Benjamin Franklin
(Founding father of USA and face on America’s 100 greenback invoice/word).
Advance tax, because the title implies, is the tax that one pays prematurely. Advance tax is the earnings tax that’s payable in case your tax legal responsibility exceeds Rs 10,000 and must be paid in the identical yr through which earnings is obtained. It’s also known as as “Pay as you Earn” scheme because you pay the tax in the identical yr through which you earn earnings.
In case you are a Salaried worker and have earnings apart from earnings from wage then you must test Advance Tax.
In case you are Freelancer, Professionals, companies, YouTuber, Blogger then it’s important to know and pay Advance Tax
- Should you estimate that you’ll owe greater than Rs.10,000 on March 31 in taxes (after deducting TDS) then you must pay advance tax.
- You pay this tax in 4 installments and the due dates with Proportion of Advance Tax to be paid are 15 June(15%), 15 September(45%), 15 December(75%) and 15 March(100%).
- If the Earnings Tax will not be payable as per the above schedule, Curiosity is liable to be paid for late cost of tax as follows
- Curiosity underneath part 234B @ 1% per thirty days
- Curiosity underneath part 234C @ 1% per thirty days is payable if 90% of the tax will not be paid earlier than the top of the monetary yr
- Advance Tax might be paid by submitting a Tax Fee Challan,ITNS 280.Challan
- Tax relevant: For particular person Choose 0021 : INCOME-TAX (OTHER THAN COMPANIES)
- Kind of Fee: Kind of cost depends upon why you might be paying earnings tax. Enter 100 for Advance Tax.
- It’s essential to declare Advance Tax whereas submitting Earnings Tax Return ITR
Who has to pay Advance Tax?
The provisions of the Earnings Tax Act make it compulsory for each particular person, self-employed skilled, businessman, and company to pay Advance Tax, on any earnings on which TDS(Tax Deducted at Supply) will not be paid. Each people, in addition to corporates, should pay this tax.
Advance Tax for Salaried Worker
If a person’s solely earnings is his wage, then the employer will deduct tax from his earnings(TDS) and submit it. In such a case there isn’t any trigger for fear over advance tax cost. The tax deducted will likely be made accessible to the worker by the employer in Type 16.
However when a Salaried worker has earnings apart from earnings from wage then he has to fret about Advance Tax. Ex earnings from different sources reminiscent of curiosity gained (on saving checking account), capital features, lottery wins, from home property or from enterprise, then advance tax turns into related.
If one estimates that one will owe greater than Rs.10,000 on March 31 in taxes (after deducting TDS) then you must pay advance tax.
Freelancers, Professionals, companies, YouTuber
Presumptive earnings for Professionals: Impartial professionals reminiscent of docs, attorneys, architects, and many others. come underneath the presumptive scheme underneath part 44ADA. They must pay the entire of their advance tax legal responsibility in a single installment on or earlier than 15 March. They will additionally pay the whole tax due by 31 March.
Presumptive earnings for Companies: The taxpayers who’ve opted for a presumptive taxation scheme underneath part 44AD must pay the entire quantity of their advance tax in a single installment on or earlier than 15 March. Additionally they have an choice to pay all of their tax dues by 31 March.
Who doesn’t must pay Advance Tax?
Advance Tax is NOT relevant when
- A senior citizen (the resident particular person who’s 60 yrs or extra) who wouldn’t have any earnings from enterprise & career, doesn’t must pay advance tax. This transformation was launched from AY 2013-14. Extra particulars at Senior Citizen : Earnings and Tax
- If one adopts presumptive taxation then one has to declare earnings on the prescribed price and no different deductions are allowed. One has to pay the whole advance tax by 15 March. That is relevant for
The right way to discover if it’s important to pay advance tax
As we all know there are 5 forms of Earnings, Earnings from Wage, Earnings from Home Property(Any residential or business property that you just personal will likely be taxed), Earnings from Capital Features (Once you promote Mutual Funds, Shares, Bond, Gold, Land or Property, Earnings from Income and Features of Enterprise or Occupation & Earnings from Different Sources. Particulars in our article Perceive Earnings Tax
For advance tax test
- Earnings from Home Property: If in case you have rental earnings.
- Earnings from Capital Features: Have you ever offered Mutual Funds, Shares, Bond, Gold, Land, or Property. Tax categorised as Lengthy Time period Capital Achieve Tax(LTCG) and Brief Time period Capital Achieve(STCG) relies on the asset you offered, the time interval you owned the asset. Particulars in our article Capital Achieve Calculator on Sale on Property, Mutual Funds, Gold, Shares
- Earnings from Income and Features of Enterprise or Occupation: The earnings chargeable to tax is the distinction between the credit obtained on working the enterprise and bills incurred.
- Earnings from Different sources: Verify the following earnings. Particulars in our article Earnings From Different Sources
- the curiosity of Saving Financial institution Account,
- Curiosity from Mounted Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS) and many others
- Curiosity from Earnings Tax Refund
- Household Pension
- Dividend Earnings: Dividend obtained on or after 1 April 2020 is taxable within the palms of the investor/shareholder. Particulars in our article Dividend and Tax
What if we don’t pay Advance Tax?
If it’s important to pay advance tax and Should you fail to pay your Advance Tax or, should you pay lower than the stipulated tax, you’ll be penalised and must pay additional underneath Sections 234A, 234B, 234C. So there isn’t any escaping Tax. Because the Earnings Tax workplace says “Pay Tax Karo Loosen up“
The curiosity is calculated at 1% easy curiosity per thirty days on the defaulted quantity for 3 months. The curiosity penalty would proceed as much as the following deadline. If even after the final deadline of 15 March, the tax will not be paid, then the 1% could be on the defaulted quantity for a month, till the tax is absolutely paid.
Why Pay Advance Tax?
Advance tax is among the main instruments utilized by the Govt. to gather tax from the assesses throughout India. This pay as you go type of tax is designed in such a manner that an assessee is made to pay tax to the Govt. in a ‘Pay as You Earn Scheme’. This primarily goals at lowering the last-moment hassles to an assessee for cost of tax legal responsibility which can be due to both scarcity of time or funds.
The goal of the Indian authorities behind establishing the advance tax system was to hurry up the tax assortment. This method additionally allowed the federal government to earn curiosity on the quantity collected as tax, thus growing funds to the federal government coffers.
How is advance Tax Calculated?
Advance tax is computed on earnings that a person may earn in the course of the yr, in that sense, it’s estimated earnings. The tax is calculated utilizing the charges relevant for the monetary yr.
Suppose after paying your first installment of tax on the estimated earnings, your precise earnings elevated attributable to some shares/mutual funds you offered, You will have to revise your earnings and accordingly pay the differential within the subsequent installment.
Though Advance Tax is liable to be paid on all incomes together with Capital Features, it’s troublesome to estimate the Capital Features which can come up in an yr. Due to this fact, in such circumstances, it’s supplied that if any such earnings arises after the due date of any installment, then, the whole quantity of tax payable on such capital acquire (after claiming exemption underneath part 54) shall be paid in remaining installments of Capital Features that are due. If the whole quantity of tax payable is so paid, then no curiosity on late cost will likely be levied
Listed beneath are the steps to calculate advance tax:
- Decide the Earnings: Decide the earnings you obtain apart from your wage. It’s necessary to incorporate any ongoing agreements which may pay out later.
- Minus the Bills: Deduct your bills from the earnings. You’ll be able to deduct bills associated to your work (freelancing) reminiscent of lease of the work place, journey expense, web and telephone prices.
- Whole the Earnings: Add up different earnings that you just may obtain within the type of lease, curiosity earnings, and many others. Deduct the TDS deducted out of your salaried earnings.
- Whole Advance Tax: If the tax due exceeds Rs.10,000 you then’ll must pay advance tax.
Advance tax Charges and Dates
From FY 2016-17 For each particular person and company taxpayers
| Due Date | Advance Tax Payable |
|---|---|
| On or earlier than fifteenth June | 15% of advance tax |
| On or earlier than fifteenth September | 45% of advance tax |
| On or earlier than fifteenth December | 75% of advance tax |
| On or earlier than fifteenth March | 100% of advance tax |
Under are the dates and percentages earlier than FY 2016-17.
| Due Date | Installment % of Advance Tax |
| fifteenth September | Up-to 30% |
| fifteenth December | Up-to 60% |
| fifteenth March | Up-to 100% |
For instance, suppose your whole tax legal responsibility(after deducting TDS) for this yr is Rs 1,00,000
So by fifteenth June you will want to pay 15% which involves Rs 15,000
So by fifteenth September you will want to pay 45% which involves Rs 45,00
By fifteenth December you’ll have to cowl 75%, so you will want to pay one other Rs 75,000.
By fifteenth March, 100% of advance tax involves Rs 100,000, you will want to pay one other Rs 25,000.
Penalty on not paying/paying much less Advance Tax: Sections 234A, 234B and 234C
Should you owe greater than Rs.10,000(after deducting TDS) whereas submitting your returns, you can be penalized with Curiosity underneath sections 234A , 234 B & 234 C
Beneath Part 234C, there are three elements. For the primary instalment, the shortfall penalty is calculated for 3 months @1% p.m. Equally, within the second instalment, the shortfall penalty can be calculated for 3 months @1% p.m and the ultimate instalment is calculated at a flat price if 1% for 1 month solely.
Beneath part 234B, penalty arises when the overall quantity of advance tax paid together with the quantity of TDS is lower than 90% of the overall tax legal responsibility. In such a case, curiosity is calculated at 1% per thirty days of the quantity of shortfall for the time interval from April to the month through which the return is filed.
Beneath part 234A, the legal responsibility arises solely when the return is filed after the due date which for AY 2020-21 is 30 Nov.
Finotax has nice Advance tax calculators. Test it out right here. Let’s have a look at these sections intimately.
Curiosity underneath part 234 C
234 C will likely be relevant should you don’t pay your advance taxes in common installments. As per the Earnings Tax Act, you’re speculated to pay 15% of advance tax by 15 Jun, 30% of your advance tax by fifteenth Sep, 60% by fifteenth December and 100% by fifteenth March. Let’s see it by means of some examples.
Mr. Khushal is working a clothes store. Tax Legal responsibility of Mr. Khushal is Rs 45,500. He has paid advance tax as given beneath:
Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September, Rs. 12,000 on fifteenth December, Rs. 14,500 on fifteenth March. Is he liable to pay curiosity underneath part 234C, if sure, then how a lot?
Any tax paid until thirty first March will likely be handled as advance tax. Contemplating the above dates, the advance tax legal responsibility of Mr. Khushal at totally different installments will likely be as follows:
1) In first installment: Not lower than 15% of tax payable must be paid by fifteenth June. The tax legal responsibility is Rs. 45,500 and 15% of 45,500 quantities to Rs. 6,825. Therefore, he ought to pay Rs. 6,825 by 15thJune. He has paid Rs. 8,000, therefore, there isn’t any quick cost in case of first installment.
2) In second installment: Not lower than 45% of tax payable must be paid by 15thSeptember. Tax legal responsibility is Rs. 45,500 and 45% of 45,500 quantities to Rs. 20,475. Therefore, he ought to pay Rs. 20,475 by fifteenth September. He has paid Rs. 8,000 on fifteenth June and Rs. 11,000 on fifteenth September (i.e. whole of Rs. 19,000 is paid until 15thSeptember). There may be quick cost of Rs. 1,475 (i.e. Rs. 20,475 – Rs 19,000).
Although there’s quick cost of Rs. 1,475 however Mr. Khushal won’t be liable to pay curiosity underneath part 234C as a result of he has paid minimal of 36% of advance tax payable by fifteenth September. He has paid Rs. 19,000 until fifteenth September and 36% of 45,500 quantities to Rs. 16,380. Therefore, no curiosity shall be levied in case of deferment of second installment.
3) In third installment: Not lower than 75% of tax payable must be paid by fifteenth December. Tax legal responsibility is Rs. 45,500 and 75% of 45,500 quantities to Rs. 34,125. Therefore, he ought to pay Rs. 34,125 by fifteenth December. He has paid Rs. 8,000 on fifteenth June, Rs. 11,000 on fifteenth September and Rs. 12,000 on fifteenth December (i.e. whole of Rs. 31,000 is paid until 15thDecember). There’s a quick cost of Rs. 3,125 (i.e. Rs. 34,125 – Rs 31,000). Therefore, he will likely be liable to pay curiosity underneath part 234C on account of quick fall of Rs. 3,125 (*).
There’s a quick fall of Rs. 3,125 in case of third installment. As a consequence of quick fall in case of third installment, curiosity underneath part 234C will be levied. Curiosity will likely be levied at 1% per thirty days or a part of the month on the quick paid quantity of Rs. 3,100 (i.e. Rs. 3,125 rounded off to Rs. 3,100 as per Rule 119A). Curiosity will likely be levied for a interval of three months. In different phrases, curiosity will likely be levied on Rs. 3,100 at 1% per thirty days for 3 months. Curiosity underneath part 234C will come to Rs. 93.
4) In final installment: 100% of tax payable must be paid by fifteenth March. The overall tax legal responsibility of Rs. 45,500 is paid by Mr. Khushal by fifteenth March (i.e. 8,000 on fifteenth June, Rs. 11,000 on15th September, Rs. 12,000 on fifteenth December and Rs 14,500 on fifteenth March). Therefore, there isn’t any quick cost in case of final installment. Thus, Mr. Khushal won’t be liable to pay curiosity underneath part 234C in case of final instalment.
Curiosity underneath part 234 B
234 B will likely be relevant when the overall advance tax paid is lower than 90 % Tax Payable. This will likely be charged at 1% per thirty days until you pay your remaining taxes. Let’s work it out by means of an Instance:
Mr. Suraj is a businessman. His tax legal responsibility as decided underneath part 143(1) is Rs. 28,400. He has not paid any advance tax however there’s a TDS credit score of Rs. 10,000 in his account. He has paid the stability tax on thirty first July i.e. on the time of submitting the return of earnings. Will he be liable to pay curiosity underneath part 234B, if sure, then how a lot
On this case, the tax legal responsibility (after permitting credit score of TDS) of Mr. Suraj involves Rs. 18,400 (i.e. Rs. 28,400 – Rs. 10,000) which exceeds Rs. 10,000 and therefore, he will likely be liable to pay advance tax. He has not paid any advance tax and therefore, he will likely be liable to pay curiosity underneath part 234B. Curiosity underneath part 234B will likely be levied at 1% per thirty days or a part of the month. In this case, Mr. Suraj has paid the excellent tax on thirty first July and therefore, curiosity underneath part 234B will likely be levied for the interval from 1st April to thirty first July i.e. for 4 months. Curiosity will likely be levied on unpaid tax legal responsibility of Rs. 18,400. Curiosity at 1% per thirty days on Rs. 18,400 for 4 months will come to Rs. 736.
Should you pay our taxes in between April – July interval then curiosity @1% will likely be utilized solely on the stability tax payable .
On-line Advance Tax Calculators(Free)
Video on Advance Tax
This 8:32 video explains Advance Tax.
This video talks about how you can Calculate Advance Tax
The right way to pay advance Tax?
You’ll be able to pay advance tax in India by means of two strategies: on-line or offline. Right here’s a breakdown of each:
On-line Fee:
- Go to the Earnings Tax Division’s e-payment web site: [income tax e payment ON Income Tax Department portal.incometax.gov.in]
- Enter your PAN and cell quantity and proceed after verification with OTP.
- Choose the Evaluation Yr (2024-25 for present state of affairs) and select “Advance Tax (100)” underneath Kind of Fee.
- Fill within the challan particulars like State Code, circle code (refer web site for particulars).
- Select the cost methodology (internet banking or debit card) and your financial institution.
- Preview the challan for accuracy and click on “Pay Now” to finish the cost.
Offline Fee:
- Obtain Challan 280 type from the Earnings Tax Division web site.
- Fill the challan with particulars like your PAN, evaluation yr, tax kind (100 for Advance Tax).
- Point out the installment quantity (depends upon the due date).
- Submit the finished challan at any financial institution approved to gather tax funds.
Extra Ideas:
- Use an advance tax calculator to estimate your tax legal responsibility for correct cost.
- Make a copy of the challan (on-line cost receipt or Challan 280 copy) for record-keeping throughout ITR submitting.
- The final date for the present installment (March 2024) is March fifteenth, so make sure you pay earlier than the deadline to keep away from curiosity penalties.
Advance Tax might be paid by submitting a Tax Fee Challan,ITNS 280.Challan, at designated branches of banks empanelled with the Earnings Tax Division. Branches of ICICI, HDFC and SBI settle for Advance Tax Fee Challans. Alternatively, people might pay Advance Tax on-line by means of the Earnings Tax Dept / NSDL web site. e-Fee facilitates cost of direct taxes on-line by taxpayers. To avail of this facility the taxpayer is required to have a net-banking account with any of the Approved Banks.
Video on The right way to Pay Advance Tax
https://www.youtube.com/watch?v=uyS00Ofc6og
Confirm Advance Tax in Type 26AS
Half C of Type 26AS has particulars of Tax Paid (apart from TDS or TCS). If in case you have paid Advance Tax or Self Evaluation Tax it will seem on this part. Please confirm that advance tax or self evaluation tax particulars are displaying up in Type 26AS, In the event that they don’t match along with your particulars please contact the Financial institution.
Present Advance Tax in ITR
After paying earnings tax by means of Challan 280 what subsequent? Is your accountability over. No. It’s essential to present the tax paid in your ITR, If in case you have paid Advance/ Self Evaluation tax by means of Challan 280 fill within the particulars in Tax paid and guarantee that your tax legal responsibility is 0 earlier than submitting the return as defined for ITR1 in our article Fill Excel ITR1 Type : Earnings, TDS, Advance Tax and proven in picture beneath.
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