Advance Tax Last Updated : 20 Feb 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.

What is Advance Tax?

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.

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:

  • Income received via capital gains on shares
  • Interest earned on fixed deposits
  • Winnings earned from a lottery
  • Rent or income earned from house property

How to Pay Advance Tax?

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 work place, 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 2016-17, 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:

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 AY 2017-18 :

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, 2016 15% of the Advance Tax
On or before 15 September, 2016 45% of the Advance Tax
On or before 15 December, 2016 75% of the Advance Tax
On or before 15 March, 2017 100% of the Advance Tax

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

Due Date Instalment Payable
On or before 15 June, 2016 -
On or before 15 September, 2016 -
On or before 15 December, 2016 -
On or before 15 March, 2017  100% of advance tax as reduced by the amount paid in the earlier installments.

News About Advance Tax

  • Senior citizens need not pay advance tax on salary or interest income

    In latest reports doing the rounds, it is being said that senior citizens who don’t have any income from business are exempt from paying advance taxes, irrespective of their liability status.

    For instance, if a senior citizen’s income source only includes salary and interest income, they are not required to pay advance tax installments. However, they need to pay advance taxes in future if they earn income either from business or profession.

    Just for clarification, those who attain 60 years by the end of 2016 will be considered senior citizens.

    24 October 2016

  • Majority of corporates report increase in advance tax payouts for Q2

    Advance tax is the ssystem of paying income taxes across the year in four installments, on a quarterly basis. The income tax paid in a quarter is usually considered as the measure of the company’s performance during that period. Top banks in the country have reported negative numbers in advance tax payments for the second quarter of this financial year.

    SBI reported a 25.9% decline in advance tax payment for Q2. Similarly, ICICI Bank paid 20% lesser in Q2 this year, as compared to the same period last fiscal. Central Bank was also down by 29.7%. However, HDFC Bank was up by 20%, Bank of India and Bank of Baroda reported an increase of 25% and Yes Bank was up by 40%.

    In contrast, top corporates have seen good growth in Q2, with Tata Steel reporting an increase of 100%. Reliance Industries and TCS also saw a significant growth in Q2 this financial year. UltraTech paid 20% higher in comparison to the previous year, while Mahindra & Mahindra and Lupin reported positive figures.c

    19 September, 2016

  • Certain Banks Selected by RBI to Handle Advance Tax Collection

    Certain bank branches including select branches from big wig banks such as SBI, ICICI, HDFC bank and many more have been chosen to handle the advance collection of income tax dues by the Reserve Bank of India. The responsibility to collect the advance taxes is for the September Quarter. Assesses can use the online branches of these banks to pay taxes. The aim of this is to eliminate the need for standing in long queues and reduce the last minute rush that is always witnessed at the end of the quarter. Since the remittance of income tax dues through RBI becomes too much to handle as the quarter closes, RB has selected 29 bank branches to handle the payments of IT Dues.

    12 August 2016

  • CBDT to track advance tax payments by firms

    Expecting to increase the collection of taxes in advance, the Income Tax Department has carefully designed a plan to track the payments by firms diligently. They also plan to evaluate sectoral development leanings and three-monthly financial statements of India Inc. This step is introduced at an apt time as the growth (tax accruement) in initial quarter of the current fiscal have been less, which is attached to the yearly plan of the CBDT (Central Board of Direct Taxes). This is anticipated to meet the budgetary goals.

    4 August 2016

  • Bank Advance Tax Payments go down

    Advance tax payments by Public Sector Banks (PSBs) have decreased owing to Non-Performing Assets (NPAs) but steel and pharmaceutical companies registered a hike in tax payments during the fiscal quarter ended June 30.

    Though exact figures were not made available, Principal Chief Commissioner of Income Tax and head of the Mumbai zone of the Income-Tax department DS Saksena said he expected the collections from banks to go up in the next quarters.

    RBI’s asset quality review done at the end of last year led to PSBs going for higher provisioning against the NPAs. According to advance tax figures available of private banks, Yes Bank paid Rs. 218 crore for the first quarter, up by 28 percent from the previous year, while HDFC paid Rs. 465 crore, unchanged from last year.

    15 July 2016

  • Slow growth for corporation tax in the first quarter

    The end of the first quarter of the current fiscal saw a sluggish growth in the submission of corporation tax indicating a slow and struggling economy. Changes in the advance tax collection rules saw a 22% growth in the collection of direct taxes. However, corporation tax collection remained poor reflecting a continuously weak profitability.

    Direct tax collection stood at a whopping Rs.1.2 lakh crore and out of a total direct tax collection Rs.64000 crore came from personal income tax collection which represents a growth of 48%. Earlier in June, the government had come up with a deadline for submission of advance tax by taxpayers. Currently, the Indian economy has been showing slow movement affecting the overall financial landscape of the country.

    30 June 2016.

  • Advance Tax Of Companies In Mumbai Sees Steady Growth

    There is a good growth in the advance tax paid during the first quarter of 2016-17 by top companies based in Mumbai, excluding banks and finance companies.

    However, overall advance tax payment for the quarter was stagnant as the number of public sector banks went down.

    India’s biggest private sector firm Reliance Industries paid 22.6 percent higher advance tax – Rs.1,300 crore – compared to the same quarter last fiscal. Advance tax payments of Tata Consultancy Services went up by 14 percent to Rs.900 crore and that of Tata Steel grew by a whopping 61.9 percent.

    State Bank of India paid advance taxes of Rs.1,000 crore this quarter, down from Rs.1,290 crore it paid in June 2015.

    23 June 2016

  • Individual Advance Tax payment deadline is June 15th

    First installment of advance tax payment needs to be made by June 15th this year instead of the regular deadline of 15th September every year. Budget 2016 had come up with a new deadline for payment of advance tax for individuals. A late payment fee of 1% will be charged in case a taxpayer is late in making the first installment payment by June 15th.

    The income tax compliance burden on taxpayers has increased considerably now since they are now expected to estimate their taxable income for the entire year and pay their advance tax accordingly. Advance tax payment schedule for a company is 15% , 45%, 75% and 100% till the end of one financial year.

    15 June 2016

  • Deadline For Your First Advance Tax Instalment Is Close

    It is time for you to pay the first 15% of your advance tax. The government recently changed the schedule of payment of advance tax into a 4-installment format from a 3-installment format.

    Earlier, 30% of the advance tax was to be paid by September 15, another 30% by December 15 and the remaining 40% by March 15. However, from fiscal 2016-17, the tax has to be paid in the following timetable: 15% of the advance tax by June 15, 30% by September 15, another 30% by December 15 and the last instalment of 25% by March 15.

    This payment schedule is the same for businesses and individuals. Any delay in payment will attract penalty and interest on the pending tax amount.

    7 June 2016

  • Income Tax Department to track non-filers through 3rd party sources

    Income Tax Department has stated that it will now consider taking information of non-filers of income tax from third party sources like banks, law enforcement agencies as well as foreign tax authorities. A non-filer of tax has been defined as any person who is liable to pay any tax or file his/her IT-return. The Central Board of Direct Taxes has given out specific definitions for the term ïnformation available on record”and the term “tax paid”, in order to avoid any confusion regarding the same for Advance Tax, Self-Assessment Tax, TDS/TCS.

    These definitions will be used for collection of relevant data which will go into helping the Income Tax Department keep a tab on people who have been irregular in making payments of their direct taxes.

    26 May 2016

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