Advance Tax means that you are required to pay tax to the government on your income throughout the year as you earn this Income.
Who is it applicable for? If in a financial year your total tax liability exceeds Rs 10,000 you will be required to pay Advance Tax. Do remember to include all heads of income calculating Advance Tax.
Senior citizens, those who are 60 years or older and do not run a business, are exempt from paying advance tax.
Let us point out Tax Deducted at Source (TDS) as a concept. When you receive any income (your salary, Interest Income), many a times, the person paying you will deduct TDS before paying you. If the TDS deducted is more than your tax due, then you may not have to pay advance tax.
Salaried Employees: If you work at a company and earn a salary, your employer is going to deduct TDS on salary. So you don’t have to deal with advance tax.
However, if you have Interest Income from Fixed Deposits, etc which is more than Rs. 50,000, you should calculate your tax due as you may have to pay advance tax. This trips a lot of people over as they do not know they are liable for advance tax!
Freelancers: Freelancers almost always have advance tax due. This is because when freelancers get paid, TDS deducted by the person paying the freelancer is usually not enough!
Here’s how you can calculate your Advance Tax:
Due Dates of payment of Advance Tax:
|On or before 15th June||–|
|On or before 15th September||Up to 30% of advance tax payable|
|On or before 15th December||Up to 60% of advance tax payable|
|On or before 15th March||Up to 100% of advance tax payable|
Note that you are not required to submit any supporting documents while paying your advance tax. In case some of your expected income or expenses have undergone a change, you can always re-estimate your income and adjust payments accordingly, before paying the next installment.
How to pay Advance Tax? Here’s how you can pay your advance tax to the government Pay Advance Tax.
In case due to some reason you are unable to pay Advance Tax note that Interest under Section 234B and Section 234C may become applicable.