Advance Tax Last Updated : 14 Jul 2020

Advance tax is tax payable by individuals who have sources of income other than their salary. This is applicable to rent, capital gains from shares, fixed deposits, lottery winnings, etc. It can be paid online or through certain banks.

Advance tax is the tax payable on total income of the year earned from different sources including salary, business, profession, rent, etc. The tax is supposed to be paid before the end of the financial year.

Advance tax is also known as ‘Pay as you earn’ scheme. The tax is payable if your tax liability exceeds Rs.10,000 in a financial year. The tax should be paid in the same year in which the income was received.

Advance Tax
Advance Tax

Who has to Pay Advance Tax?

Salaried individuals need not pay advance tax as they already pay tax at source, the employer deducts the tax at source. Advance tax is applicable to individuals who earn income from sources other than salary. If a salaried individual earns income from other sources, then they have to pay advance tax too.

Listed below are some of the income sources which attract advance tax:

How to Pay Advance Tax?

Advance tax can be paid through tax payment challans at bank branches which are authorised by the Income tax department. It can be deposited in authorised banks such as ICICI Bank, Reserve bank of India, HDFC Bank, Syndicate Bank, Allahabad Bank, State Bank of India and more.

Another way of paying advance tax is by paying it online through the Income Tax department or the National Securities Depository.

Advance Tax Calculation

An individual can calculate advance tax on their own and determine if they have to pay advance tax.

Listed below are the steps to calculate advance tax:

  • Determine the Income: Determine the income you receive other than your salary. It’s important to include any ongoing agreements that might pay out later.
  • Minus the Expenses: Deduct your expenses from the income. You can deduct expenses related to your work (freelancing) such as rent of the workplace, travel expense, internet and phone costs.
  • Total the Income: Add up other income that you might receive in the form of rent, interest income, etc. Deduct the TDS deducted from your salaried income.
  • Total Advance Tax: If the tax due exceeds Rs.10,000 then you’ll have to pay advance tax.

How to Pay Advance Tax Online?

The advance tax can be paid online through the online facility offered by the Income Tax department. Listed below are the steps that need to be followed to make a successful online payment for advance tax.

  • Go to the official Government website.
  • Select the right challan to pay your income tax ( Advance tax)
  • Fill in the correct details in the form. You’ll have to fill in details such as the right assessment year, address, phone number, email address, bank name, captcha code and other such important details.
  • Once you are done filling in the details, you’ll be redirected to the bank’s Net Banking page. The income to be paid should be rechecked in this page.
  • Next, you’ll get details of your payment including your challan number.
  • It is important to report your payment after you’ve made the payment. You can do so by adding an additional entry under the paid tax page.

Late Payment of Advance Tax:

If an individual forgets to pay the advance tax by the first deadline, then the individual has to pay interest. The interest is computed as 1% interest on the defaulted amount for every month until the tax is paid off completely. The same interest penalty will be applicable if you don’t pay by the second or third deadline.

Advance Tax Exemption

Senior citizens (people above 60 years of age) who do not own any business are exempted from paying advance tax. Also, taxpayers who opt for presumptive schemes are exempted from paying advance tax. These schemes can be applied for by people whose business turnover is more than Rs.2 crores in a financial year. In the year 2020-21, such scheme was extended to doctors, lawyers and architects, provided their annual receipts totals to a maximum of Rs.50 Lakhs.

Advance Tax Benefits

  • Advance tax helps in reducing stress of taxpayers. By paying tax in advance, taxpayers do not have to worry about money shortage or tax payments at the last moment.
  • It speeds up the tax collection process.
  • It increases government funds as the government can earn an interest on the collected amount.
  • Advance tax saves people from defaulting on their tax payments.
  • It helps businesses in managing their finances well and provides an idea of the income they have earned during the year.

Advance Tax Challan 280

Challan 280 allows people to pay their income tax online on the website of the Income Tax Department of India. On the website, people have to select this challan and fill the form and then use it to pay taxes online/office. If they want to pay the tax offline, they have to download Challan 280 form from the Income tax welcome, fill it and submit it at the bank.

Refund of Advance Tax

At the end of the year, if the Income Tax Department finds out that you have paid more tax than you should have paid, then it will refund the excess amount. Taxpayers can claim refund by filling and submitting Form 30. They have to make the claim within a period of one year from the last year of the assessment year.

Advance Tax Schedule for FY 2019-20 (AY 2020-21)

Listed below is the advance tax schedule for self employed and businessmen.

Installment Date Amount Payable
On or before September 15th Not less than 30% of the advance tax liability
On or before December 15th Not less than 60% of the advance tax liability
On or before March 15th 100% of tax liability

Advance Tax for FY 2019-20 (AY 2020-21) :

Advance Tax for Assessees (apart from the ones who are covered under section 44AD):

Payment Due Date Amount to be Paid as Advance Tax
On or before 15 June 15% of the Advance Tax
On or before 15 September 45% of the Advance Tax
On or before 15 December 75% of the Advance Tax
On or before 15 March 100% of the Advance Tax

Advance Tax for Assessees who are covered under section 44AD:

Due Date Instalment Payable
On or before 15 June -
On or before 15 September -
On or before 15 December -
On or before 15 March 100% of advance tax as reduced by the amount paid in the earlier installments.

News About Advance Tax

  • Late advance tax payments by corporate giants give a breather to the govt.

    The tax collection for the first quarter from India Inc has been revised and now stands at more than Rs.39,880 crore from the initial mark of Rs.8,572 crore. This revision takes place after a number of corporate giants have cleared of the dues which were due owing to the COVID-19 situation and the limitations thereafter.

    The CBDT has recently announced these figures and have also notified that some banks are still updating the final figures. As per the latest updates, the corporation advance tax payments showed a drop of about 40% as on 17 June when compared to the Rs.65,558 crore mark which was recorded during the same last year. Personal income tax advance tax payments have also witnessed a dip of as much as 48% and now it stands at Rs.6,775 crore as opposed to Rs.13,025 crore which was recorded last year during the same period. Factoring in refunds of Rs 48,903 crore against the Rs 62,813 crore in this period, net direct collections fell by 25.3 per cent to Rs 1,25,065 crore from Rs 1,67,432 crore over the period under review.

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