All about Advance Tax: Who should pay and how to calculate it

New Delhi: The last date to pay Advance Tax is upon us. The Income Tax department has once again notified taxpayers to pay the first instalment by June 15, 2024. Advance Tax is paid on the income earned in the current year. So, it has to be paid in the same financial year in which the income is earned. Advance Tax is paid in 4 instalments. First, let’s understand what is Advance Tax, who should pay it, and how it is calculated.

Last date to file Income Tax Return

What is Advance Tax?

A taxpayer has to pay advance tax every quarter instead of a lump sum. While income tax is paid in the next financial year after the year of earnings,  advance tax is paid during the financial year of earnings. You will have to pay advance tax as you earn during FY 2024-25.

Who should pay Advance Tax?

Individuals whose tax liability in a financial year is Rs 10,000 or more after deducting TDS and TCS must pay advance tax. Employees, freelancers, professionals and businessmen are required to pay advance tax. This includes senior citizens having business income. Senior citizens not having income from business are exemped.

Taxpayers can calculate their tax liability by taking their estimated income for the entire year and adjusting the exemptions and deductions.

Should salaried employees pay Advance Tax?

Salaried persons do not have to pay advance tax because the employer pays them salary after deducting TDS. Salaried people can pay advance tax when there is any income other than salary, such as income from rent, interest, or dividend.

Why is Advance Tax paid in instalments?

There are four quarters in a financial year – April to June, July to September, October to December and January to March. So, Advance Tax has to be paid on a quarterly basis. Here are the quarterly deadlines and liabilities for each instalment:

15 per cent of the total tax liability has to be paid by June 15,
45 per cent by September 15 which includes June payment
75 per cent by December 15, inclusive of June and September payment
100 per cent needs to be paid by March 15, inclusive of previous quarterly payments.

How Advance Tax is calculated

Suppose your tax liability is Rs 1 lakh, then till June 15 your tax liability will be Rs 15,000.

An instalment of Rs 30,000 (45,000-15,000) will have to be paid by September 15
Rs 30,000 (75,000-45,000) by December 15
Rs 25,000 (100,000-75,000) by March 15

Which ITR should moonlighters file?

What happens if you miss Advance Tax Deadline?

If Advance Tax or its instalment is not paid by the due date, a penalty is imposed under section 234B and section 234C. On defaulting in payment of Advance Tax or depositing less tax under Section 234B of the Income Tax Act. Penal interest means interest as a penalty. There is a penalty under section 234C for missing the instalment of Advance Tax. If you miss this deadline even by a day, you will have to pay 3 months’ interest at 1 per cent per month.

How to pay Advance Tax?

You can pay the first instalment of Advance Tax by June 15 by following these simple steps:

You will have to visit the e-filing website of the Income Tax Department www.incometax.gov.in.
Now click on the option of e-Pay Tax.
Entering PAN number and mobile number
 Select the option of Advance Tax.

Payment can be made through net banking or debit card. You can generate challan number 208 and pay Advance Tax by depositing it in the authorized bank branch.

 Advance Tax has to be paid in 4 Instalments, according to the Income Tax department. The due date for paying the first instalment of Advance Tax is June 15, 2024 failing which you will be charged a penalty.  Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today