Guide to Understand Advance Tax

What is Advance Tax?

If you have to pay Rs. 10,000 or more in taxes (Gross Tax less TDS) in a Financial Year, Advance Tax may be applicable to you. Advance Tax means paying your t ax dues based on the dates (usually quarterly) provided by the income tax department. If you don't pay advance tax, you may be liable to pay interest here.

Who needs to pay Advance Tax?

All assessees including salaried employees, self-employed professionals, businessmen etc. are required to pay Advance Tax where the tax payable (Gross Tax less TDS) is Rs. 10,000 or more.

Advance Tax is not applicable when:


A senior citizen (resident individual who is 60 years or more) who does not have any income from business & profession, is not liable to pay advance tax.


. When a taxpayer opts for the scheme of computing business income under section 44AD on presumptive basis @ 8% of turnover, such taxpayer shall be exempted from payment of advance tax for such business

What happens if advance tax is not paid?

A) SECTION 234B interest:

Your tax liability for the financial year is more than Rs 10,000 and you did not pay any advance tax.


You paid advance tax but advance tax paid is less than 90% of 'assessed tax' o Then interest under 234B is attracted. It calculated @ 1% on Assessed Tax less Advance Tax. Simple interest @1% is to be paid on any short-fall from 1st April of assessment year to the date of deposit of tax by way of selfassessment. Part of a month is rounded off to a full month.

B) SECTION 234C interest:

It is the interest charged on shortfall in the payment of advance tax. You will be required to pay simple interest @1% on any shortfall in the amount of income tax paid.

Due Dates for Advance Income Tax Installments

Advance Income Tax is payable in installments according to the dates given below:

Up to 15th June 15% of total estimated tax Nil
Up to 15th September 45% of total estimated tax 30% of total estimated tax
Up to 15th December 75% of total estimated tax 60% of total estimated tax
Up to 15th march 100% of total estimated tax 100% of total estimated tax

What are the benefits of paying Advance Income Tax:


From the point of view of the government, money is received in time because government needs money to meet its routine expenditures


From the point of view of taxpayers, it is easy for him to pay the tax in installments. So the burden of one-time payment is relieved. After all, tax payer has to pay the tax now or later.

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