Advance tax means income tax that should be paid in advance instead of lump sum payment at year-end. It helps the Govt. to receive a constant flow of tax receipts throughout the year so that the Govt can incur its expenses timely rather than receiving all tax payments at the end of the year. This keeps the government rolling
When and how much should you pay the second instalment of Advance Tax?
Who is liable to pay Advance Tax?
The eligibility criteria you will have to fulfil in order to pay advance tax are:
- Your tax liability should be INR 10,000 and above.
- You should be a salaried or a self-employed individual.
- Income received via capital gains on shares.
- Interest earned on fixed deposits.
- Winnings are earned from a lottery.
- Rent or income earned from house property.
Exemption in Advance Tax Payments
- Senior citizens aged 60 years and above are exempted from paying the advance tax.
- Salaried individuals falling under the TDS net are exempted from paying the advance tax.
- However, any earnings from sources such as interest, capital gains, rent, and other non-salary income will attract advance tax.
- If TDS deducted is more than the tax payable for the year, then one does not have to pay the advance tax.
Payment of Advance Tax:
You can choose to pay advance tax by any of the following modes:
- Offline Mode: You can pay advance tax using Challan 280 just like any other regular tax payment at bank branches authorized by the Income Tax Department.
- Online Mode: You can also pay it online through the official website of the Income Tax department.
In case you fail to pay advance tax, you will be liable to pay 3% of the shortfall - if the advance tax is more than 12% of tax).
However, it is important to note that no interest(penalty) is payable if the advance is tax paid on or before 15th September. Also, if the advance tax is less than 12% of the tax due for the year.
Advance tax is a good means to check your income, evaluate it and understand if you need to pay any taxes. Where you do come under the provisions of advance tax, best to consult the same professional for advice on the same.