What is Advance Tax | Pay Online Advance Tax Payment – Calculation, Procedure

The amount of income tax paid in advance rather than in a lump-sum payment at the end of the year is referred to as an Advance Tax. An Advance Tax, sometimes known as Earn Tax or Pay as you Earn’ Tax is paid in installments according to the income tax department’s deadlines. Taxes should be paid in the same year that the income is received. Individuals who earn money from sources other than their salary must pay advance tax. This applies to rent, capital gains from stocks, fixed deposits, and lottery winnings, among other things. It can be paid through specified banks or online. If your tax burden exceeds Rs. 10,000 in a financial year, you must pay the tax.

Advance Tax

Advance Tax Payment

Tax payment challans issued by the Income-tax department can be used to pay Advance Tax at bank branches that have been authorized by the Income-tax department. It can be placed in ICICI Bank, Reserve Bank of India, HDFC Bank, Syndicate Bank, Allahabad Bank, State Bank of India, and other recognized banks. Another option for making an Advance Tax payment is to use the Income Tax Department’s online tax payment website or the National Securities Depository.

Section of Advance Taxes

The Advance Tax sections of the Income Tax Act, 1961, are as follows:

Section of Advance Taxes
  • Liability for Advance tax payment; Section 207
  • Conditions of Advance Tax Liability; Section 208
  • Advance tax computation; Section 209
  • Payment of Advance Tax by the assessee on his initiative or in response to an assessing officer’s direction; Section 210
  • Advance Tax installments and due dates; Section 211 –
  • Advance tax credit; Section 219 –
  • Interest for failure to pay the advance tax on time; Section 234B
  • Interest for advance tax deferment; Section 234C

Importance of Advance Tax

An Advance Tax is a type of income tax that is paid in advance for income produced during a given fiscal year. Normally, the tax is due when the income is received. Even yet, under advance tax regulations, the payer must estimate his or her income for the entire year. And the tax is paid at particular intervals depending on this estimate. It is critical that the taxpayer assesses his or her income and then calculates the expected tax on it to determine whether and how much advance tax is due.

Who is Responsible for Paying Advance Tax?

To be eligible to pay Advance Tax, you must meet the following criteria:

  • You should either be employed or self-employed.
  • Your tax due should be at least Rs.10,000.
  • Fixed deposit interest is earned.
  • Gains on stock investments are a source of income.
  • Rent or money earned from a house is referred to as “house property income.”
  • A lottery winner’s winnings.

Advantages of Paying Tax in Advance

Following are the advantages of paying tax in advance:

  • Taxpayers will feel less stressed if they pay their taxes ahead of time.
  • Taxpayers do not have to worry about money shortages or late tax payments if they pay their taxes in advance.
  • It facilitates the collecting of taxes.
  • People who pay their taxes in advance avoid defaulting on their obligations.
  • It aids businesses in effectively managing their finances and offers an estimate of the amount of money they have earned over the year.
  • It boosts government funds by allowing the government to receive interest on the money collected.

Pay Online Service Tax

Advance Tax Due Date

The final installment of advance tax payment for the Financial Year 2020-21 was due on March 15, 2021. Taxpayers had to pay the full amount of their advance tax liability on this date.

  • Advance Tax schedule for businessmen and self-employed persons

The advance tax schedule for self-employed and businessmen is as follows:

Installment DateAmount Payable
On or before September 15thNot less than 30% of the tax liability in advance
On or before December 15thNot less than 60% of the tax liability in advance
On or before March 15th100% of tax liability
  • Advance Tax for Assessees (Aside from those who are protected by Section 44AD)

The Advance Tax for Assessees Aside from those who are protected by Section 44AD is listed below:

Payment Due DateAmount to be Paid as Advance Tax
On or before 15 June15% of the Advance Tax
On or before 15 September45% of the Advance Tax
On or before 15 December75% of the Advance Tax
On or before 15 March100% of the Advance Tax

What is Surcharge

Procedure to Pay Online Advance Tax Payment

The advance tax can be paid online through the Income Tax Department’s online service. The processes for making a successful online advance tax payment are outlined below.

  • On the home page of the website, click on the “Services” tab followed by “e-payment: Pay Taxes Online”.
Services
  • To pay your income tax, choose the appropriate challan for Advance Tax.
Advance Tax
  • Complete the form with the necessary credentials like the correct assessment year, phone number, address, bank name, email address, captcha code, and other relevant data.
Application Form
  • You’ll be forwarded to the bank’s Net Banking website once you’ve completed the form. This page should be double-checked before proceeding.
  • Following that, you’ll receive payment details, including your challan number.
  • You must declare your payment once you’ve made it. You can do so by creating a new entry on the paid tax page.

What is Direct Tax 

Form Required in Advance Tax

Challan No. ITNS 280 is the form that must be properly filed by the deadlines. Challan No. ITNS 280 has the following prerequisites:

Assessment Year: Choose the correct assessment year for which the tax is to be paid because it is being sent out in advance for the following fiscal year.

PAN Details: Make sure you post the right PAN details, or your tax will be lodged in the name of someone else.

Choosing a payment method: In the form, the taxpayer must select the type of payment. It is advance tax if the tax is paid for the same fiscal year based on the estimated revenue. It is a self-assessment tax if the tax is paid after the end of the financial year.

A Challan Identification Number (CIN) will be supplied after the payment has been made. You must keep a record of this information and utilize this CIN when filing your tax return. Also, double-check whether the IT department has received the ITNS 280 online payment.

What is Advance Tax Challan280?

People can use Challan 280 to pay their income tax online at the Income Tax Department of India’s website. People must go to the website and select this challan, complete the form, and then use it to pay taxes online or in person. They must download Challan 280 form from the Income-tax welcome, fill it out, and submit it to the bank if they want to pay the tax offline.

Income Tax e Verification 

Calculation of Advance Taxes

Following the methods and instructions below, you can quickly calculate how much advance tax you’ll have to pay:

  • First of all, estimate how much money you made in the financial year for which you’re calculating advance taxes. These are the several types of revenue that should be considered when calculating your earnings:
    • Income from savings accounts, Interest from FDs, and other sources.
    • Professional earnings
    • Gains in capital
    • Rental revenue
    • If minors’ earnings are added to the taxpayer’s,
    • Any other sources of income
  • To calculate your gross taxable income, multiply your salary by the figure above. While advance tax is not charged on your salary, the total amount may change your tax bracket, affecting your tax liability.
  • Determine the amount of tax due by using the most recent income tax slab that applies to you.
  • Deduct the TDS that will be deducted or has already been deducted according to the TDS slab.
  • You must pay advance tax if your tax liability after the TDS deduction exceeds Rs.10,000.

The table below will assist you in explaining the method of advance tax calculation –

 advance tax calculation

Example of Calculation of Advance Tax

Suppose, if your tax due is Rs.1 lakh, you would have to pay:

Payment Due DateAmount to be Paid as Advance Tax
On or before 15 JuneRs.15,000
On or before 15 SeptemberRs.45,000
On or before 15 DecemberRs.15,000
On or before 15 MarchRs.25,000

To avoid fines, make sure you pay your taxes on time.

Note that the amount of advance tax you pay will vary based on the amount of tax you owe and the date you pay it.

Is it Possible to Pay Taxes in Advance After the Due Dates?

Yes, you can pay an advance tax after the due date, but you’ll have to pay interest under section 234C if you miss the deadline. The interest payable under section 234C for all assessees excluding those paying tax under section 44AD and section 44ADA is listed below –

PERIODINTEREST PAYABLEINTEREST NOT PAYABLE
On or before 15th JuneOn the amount of the shortfall, a simple interest of 1% per month is payable for 3 months.Shortfall = 15% Tax actually payable – Tax actually paidIf the advance tax paid by the assessee on the current income on or before 15th June is not less than 12% of the tax due on the returned income.
On or before 15th SeptemberOn the amount of the shortfall, a simple interest of 1% per month is payable for 3 months. Shortfall = 45% Tax actually payable – Tax actually paidIf the advance tax paid by the assessee on the current income on or before 15th September is not less than 36% of the tax due on the returned income.
On or before 15th DecemberOn the amount of the shortfall, a simple interest of 1% per month is payable for 3 months. Shortfall = 75% Tax actually payable – Tax actually paid
On or before 15th MarchOn the amount of the shortfall, a simple interest of 1% per month is payable for 1 month. Shortfall = Tax actually payable – Tax actually paid.

For the assessee paying tax under sections 44AD and 44ADA, the interest payable under section 234C is listed here.

PERIODINTEREST PAYABLE
On or before 15th MarchOn the amount of the shortfall, simple interest of 1% per month is payable for three months. Shortfall = Tax actually payable – Tax actually paid

It is crucial to highlight that where a shortfall occurs as a result of underestimating or failing to estimate the following, interest under section 234C is not due.

  • The amount of gain in the capital;
  • The total amount of optimistic revenue like lottery winnings, gambling winnings, and so on.
  • In circumstances where the sum accrues/arises for the first time, the income falls under the heading “Profit and gains of business or profession.”
  • The amount of tax levied on certain dividends paid by domestic corporations (section 115BBDA).
  • However, interest under section 234C is not payable if the assessee has paid the entire amount of tax due on the above-mentioned income at the time of paying the remaining advance tax installment, or if no installment is due, the tax is paid before March 31st.

What is Indirect Tax

Advance Tax Refund

If the Income Tax Department discovers that you have paid more tax than you should have, the IT department will reimburse the excess amount paid after the fiscal year. Taxpayers can obtain a refund by filling out Form 30. The taxpayer will have one year from the end of the previous assessment year to file a claim.

Advance Tax Payments Exemption

The exemptions for Advance Tax Payments are as follows:

  • Senior citizens aged 60 and up are not required to pay the advance tax.
  • Salaried people who are subject to TDS are exempt from paying the advance tax. Interest, capital gains, rent, and other non-salary income, on the other hand, will be subject to advance tax.
  • If the TDS deducted exceeds the tax due for the year, there is no need to pay the advance tax.

FAQ’s

What is the procedure for paying advance tax?

You have the option of paying your advance tax by online banking or challan.

Is it necessary for an NRI to pay advance tax?

If your earnings exceed Rs.10,000, you will be obliged to pay advance tax.

Will any tax due until the 31st of March be considered an advance tax?

Yes, any tax paid before the 31st of March will be counted as Advance Tax.

On March 15, I forgot to pay my fourth installment. So, what should I do now?

If you miss the deadline for paying your fourth installment on March 15, you can pay it by March 31.

What happens if the amount of advance tax paid exceeds the entire tax liability?

If the amount of advance tax paid exceeds the entire tax liability, the difference will be returned. If the advance amount exceeds 10% of the tax liability, the IT Department will pay interest at the rate of 6% per year.

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