Advance Tax Installment Deadline: Many people, especially business owners and celebrities, pay advance taxes worth crores of rupees every year. For the financial year 2024-25, the deadline to pay advance tax is March 15. According to Indian tax laws, if your total tax liability for the year is more than Rs 10,000, you must pay advance tax. Here’s a simple guide to help you understand how to calculate and pay advance tax.
Advance tax is the income tax you pay in advance instead of paying it all at once at the end of the year. It is paid in instalments throughout the financial year. This helps the government collect taxes regularly and ensures taxpayers don’t face a huge tax burden at once.
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How to Calculate Advance Tax?
Calculating advance tax involves a few steps. Here’s how you can do it:
- Estimate Your Total Income: First, calculate your expected income for the year. This includes salary, business income, rent, interest, capital gains, and any other earnings.
- Subtract Deductions: Next, subtract any deductions you are eligible for under the Income Tax Act. For example, deductions under Sections 80C, 80D, and others can reduce your taxable income. Remember, the old and new tax regimes have different deduction rules, so choose the one that suits you.
- Calculate Your Tax Liability: Based on your taxable income, calculate how much tax you need to pay using the applicable tax slab rates.
- Subtract TDS/TCS: If tax has already been deducted from your income (like TDS on salary or TCS on purchases), subtract that amount from your total tax liability.
- Determine Advance Tax: If your final tax liability is more than Rs 10,000, you must pay advance tax.
When to Pay Advance Tax?
Advance tax is paid in four instalments:
- 15% by June 15
- 45% by September 15
- 75% by December 15
- 100% by March 15
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If you miss these deadlines, you may have to pay interest on the unpaid amount.
Penalties for Missing Advance Tax Payments
Ritika Nayyar, a partner at Singhania & Co., explains that failing to pay advance tax can lead to penalties:
- Interest Under Section 234B: If you pay less than 90% of your total tax liability as advance tax, you will be charged 1% interest per month on the unpaid amount. This interest starts from April 1 of the assessment year until you pay the tax.
- Interest Under Section 234C: If you miss any of the advance tax instalment deadlines, you will be charged 1% interest per month on the unpaid amount for each missed deadline.
How to Pay Advance Tax Online?
Paying advance tax is easy and can be done online. Follow these steps:
- Go to the Income Tax Department e-filing portal.
- Click on the ‘e-Pay Tax’ option in the ‘quick links’ section.
- Enter your PAN and mobile number, then verify them by entering the OTP sent to your phone.
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Select the appropriate tax category under ‘Income Tax’.
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Select payment type and fill in the tax amounts you need to pay.
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Select your preferred method (Net banking, debit/ credit card, UPI).
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Review the challan details and click ‘pay now’ to complete the transaction.
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Download and save the tax receipt for your records.
