The Income Tax Act classifies Advance Tax as an approach of paying taxes in installments during the calendar year rather than paying an entire tax bill at the end of the year. It is sometimes referred to as the “pay-as-you-earn” system.
Applicability of Advance Tax
All taxpayers, such as both individuals and businesses, have to pay advance tax if their aggregate tax liability surpasses ₹10,000 in a given fiscal year. It applies to multiple kinds of income, including salaries, business, profession, rent, and gains from capital.
Due Dates and Payment Schedule
The advance payment of taxes is paid in specified parts accordance to the due dates dictated by the Income Tax Department:
| Due Date | For Non-Corporates | For Corporates |
| On or before 15th June | 15% of the tax | 15% of the tax |
| On or before 15th September | 45% of the tax (cumulative) | 45% of the tax (cumulative) |
| On or before 15th December | 75% of the tax (cumulative) | 75% of the tax (cumulative) |
| On or before 15th March | 100% of the tax | 100% of the tax |
Taxpayers with business income subject to the presumptive taxation scheme (Such as 44AD/ADA/AE) must pay advance tax in one installment by March 15th (100% of tax liability).
Calculation of Advance Tax
- Estimate Income: Determine total expected income for the fiscal year.
2. Subtract eligible exemptions from Sections 10, 80C, etc.
3. Determine taxable income.
4. Apply slab rates for individuals or flat rates for businesses.
5. Reduce your tax liability by reducing the amount already deducted at source (TDS).
6. If the tax liability exceeds ₹10,000, you must pay it as
Non-Payment or Late Payment
Failure to pay advance tax or a short payment brings interest under Sections 234B and 234C.
- Section 234B: Interest for failing to pay 90% of total tax amount by March 31st.
• Section 234C: Interest for delayed or unpaid advance tax installments.
How to Pay Advance Tax
Advance tax can be paid online through the Income Tax Department’s official portal or at approved bank branches with challan.
Please let me know if you need any specific examples or clarifications!
Conclusion
Finally, Advance Tax is an important tool under the Income Tax Act that ensures timely tax collection by distributing tax payments across the fiscal year. This applies to individuals, organizations, and entities with a tax due over ₹10,000, and prompt payment avoids interest penalties under Sections 234B and 234C. Taxpayers can efficiently manage their tax responsibilities by accurately calculating income, taking advantage of eligible deductions, and following payment schedules. This arrangement not only provides the government with a consistent revenue stream, but it also saves taxpayers from having to make lump-sum payments at the end of the year. This arrangement provides the government with a consistent revenue stream while also allowing taxpayers to escape the hardship of lump-sum payments at the end of the year.
