Making your money work for you is smart financial planning. Earning extra income by way of investing in FD’S, property rental income, or even business income carries tax repercussions. A salaried individual does not need to worry about paying taxes to the government as the employer takes care of it by deducting it from his/her salary. For individuals earning income from other sources, taxes must be paid to the government in advance on a quarterly basis, known as advance tax, which will be discussed in this guide.
Advance Income Tax is a mechanism for the government to collect Income Tax revenue on a regular (quarterly) basis. The other widely known mechanism is TDS. Though TDS is very effective mechanism, it is used in combination with Advance Tax as certain incomes are not subject to TDS and further in many cases the rate of TDS is less than the rate at which the income is taxed in the hands of a taxpayer.
With the amendment in tax laws from F.Y.2018-19 all the tax payers are required to pay the Advance Tax as per the below schedule
|Due Date||Advance tax Payable|
|On or before 15th June||15% of estimated Advance Tax|
|On or before 15th September||45% of estimated Advance Tax|
|On or before 15th December||75% of estimated Advance Tax|
|On or before 15th March||100% of estimated Advance Tax|
Follow these steps to make online payment of Advance Income Tax:
Important Note: If you select your bank as ICICI Bank then by default you are directed to ICICI Bank’s Corporate Banking Login Screen. You have to click ‘Personal (Retail) Login’ button so that it takes you to ‘Personal Banking’ Login Screen wherein you can enter your user ID and password.
|ALPHABETICALLY SORTED LIST OF BANKS REGISTERED FOR ACCEPTING ONLINE INCOME TAX PAYMENT|
|Allahabad Bank||Andhra Bank||Axis Bank|
|Bank of Baroda||Bank of India||Bank of Maharashtra|
|Canara Bank||Central Bank of India||Corporation Bank|
|Dena Bank||HDFC Bank||ICICI Bank|
|IDBI Bank||Indian Bank||Indian Overseas Bank|
|Jammu and Kashmir Bank||Oriental Bank of Commerce||Punjab National Bank|
|State Bank of Bikaner & Jaipur||State Bank of Hyderabad||State Bank of India|
|State Bank of Indore||State Bank of Mysore||State Bank of Patiala|
|State Bank of Travancore||Syndicate Bank||UCO Bank|
You need to pay Advance Tax when your additional Income Tax liability (i.e. Income Tax liability in addition to the tax deducted at source by employers/others) for the Financial Year is estimated to be more than INR 10,000. Typically, you have to pay Advance Income Tax if you have additional income in the form of interest, rental, capital gains, Income from business or profession, income earned abroad, etc.
i. You are a senior citizen and do not have income from business or self-employment, or
ii. The additional Income Tax liability (in addition to the TDS) for the year does not exceed INR 10,000.
In case you do not pay Advance Income Tax, you would be required to pay interest under section 234B and under section 234C of the Income Tax Act, 1961. However, sometimes there can be exceptions. Let’s look at a scenario:
You can avoid paying Advance Income Tax if you report the additional income to the payroll department of your employer organization in which case, the Income Tax on additional income would be deducted by the employer from your salary. However, while reporting the additional income with the employer, ensure that the amount reported is adjusted for the TDS on such income. For example, if you have an additional income of INR 1,00,000 in the form of interest on fixed deposit. The bank deducts 10% Income Tax on the amount of interest. However, if you are in 30% tax bracket, you have to pay only balance 20% Income Tax. If you decide to report this income with the employer organization, it would deduct Income Tax @ 30.9%. This would result in total TDS of 40.9% on the interest income which may result in, you have to claim a refund at the time of tax filing. To avoid this, you may report additional income of only INR 67,640 (instead of INR 1,00,000) so that the total TDS on the income of INR 1,00,000 equals the amount of Income Tax thereon. Many individuals prefer not to declare other sources of income with the employer organization for many reasons and therefore opt to pay the Advance Tax.
You are required to pay 75% of the Income Tax as Advance Tax by December 15, 2018. For example, you are in 30% tax bracket. Income Tax on your salary income is deducted at source by the employer. You have additional income in the form of interest on fixed deposits to the tune of INR 1,00,000. Bank would be deducting Income Tax thereon @ 10%. The total additional Income Tax, net of TDS, would be INR 20,900, (including education cess) approximately. 75% of this amount needs to be paid by December 15, 2018.