Advance Tax in India: deadline, eligibility and payment process – CNBC TV18

Advance tax is a mechanism that allows taxpayers to pay their income tax liabilities in the entire year installments as a lump sum at the end of the financial year. This system ensures a stable flow of revenue to the government and spreads the taxpayer’s burden.

Need to pay advance tax?

According to Section 208 of the Income Tax Act, 1961, taxpayers with estimated annual tax liability require more than ₹ 10,000 to pay advance tax. This applies to both individuals and businesses.

However, senior citizens aged 60 and above who do not earn income from any business or profession are exempted from paying advance tax during the financial year.

Time limit for advance tax installments

Advance tax is paid in four installments in a financial year, with the following deadline and percentage:

• First installment (15 June): 15% of total tax liability
• Second installment (15 September): 45% of total tax liability
• Third installment (15 December): 75% of total tax liability
• Fourth installment (March 15): 100% of total tax liability

If the fixed date comes on leave or on a day when the banks are closed, taxpayers can pay on the next working day.

How to calculate advance tax?

Advance tax in India is determined on the basis of the implemented income tax slab and involves estimating the total income of the taxpayer for the financial year. Here is a step-by-step guide to calculate advance tax:

Step-by-step calculation:

1. Calculate your gross total income: Add income from all sources including salary, home property, business or profession, capital gain and other income.
2. Decrease cuts under chapter: To reach your taxable income, reduce gross total income by cuts applicable under section 80C, 80D, etc.
3. Apply exemption under Section 87A: If the eligible are, calculate and cut the discount under Section 87A from your taxable income.
4. Add overload (if applied): Include any surcharge applied based on your income level.
5. Include health and education cess, Calculate health and education cess at 4% on total tax amount (including any surcharge).
6. Account for marginal relief (if applied): If your income is more than the threshold for surcharge, apply marginal relief to reduce tax burden when the eligible is eligible.
7. Determine net taxable income: After factoring in cess and marginal relief, you arrive at the final tax liability.
8. Calculate tax liability according to the slab: Apply rates by applying to your net income to calculate the total tax liability.
9. TDS deduction (tax deduction at source), To reach your remaining tax liability, reduce any TDs already cut from your income during the year.

Punishment for non-paying

Failure to pay advance tax on time attracts penal interest of 1% per month under the Income Tax Act’s 234B and 234C. This penalty is imposed as simple interest on the unpaid amount of advance tax, making timely payment to avoid additional costs.

How to pay advance tax?

Payment of advance tax online is straightforward. Here is a step-by-step guide:

• Visit the official income tax department website.
• Under the accelerated link tab, select the ‘e-Pe’ option.
• Enter your PAN, mobile number, and click ‘Continue’.
• You will get an OTP on your registered mobile number. Enter OTP and proceed.
• Select the ‘Income Tax’ option and fill your details, including the assessment year, contact information and bank names.
• Once completed, the system redeals you to the payment gateway. Enter the required payment details and complete the transaction.
• After payment, you will get a confirmation with the challan number for your record.