What is Advance tax
Advance tax is income tax paid in advance during the fiscal year rather than at the conclusion. The tax laws specify when this must be paid throughout the year. Advance tax, also called as earn tax, is to be paid in instalments on the due dates set by the income tax department.
Who is liable to pay Advance tax?
When a person’s tax liability exceeds Rs 10,000 after subtracting TDS, advance tax applies. If advance tax is not paid by the due date, interest on the tax is payable under the requirements of the I-T Act.
As per Section 208 of the Income Tax Act, Every person (individual, firm, company, etc.) whose estimated tax liability for the year (i.e., for the year in progress such as FY 2021-22, FY 2022-23, etc.) after TDS (i.e., TDS which is deducted for the person by its payers/clients/banks, etc.) is Rs. 10,000 or more shall pay its tax for the year in advance during the same financial year. Such tax shall be paid in instalments.
Individuals, having only salary income are not required to pay advance tax as the liability to deduct and deposit tax is on the employer making such payment in the form of TDS?.
Who is not required to pay Advance tax?
A resident senior citizen (i.e., an individual of the age of 60 years or above during the financial year) not having any income from business or profession is not liable to pay advance tax.
Taxpayer who opted for presumptive taxation scheme of section 44AD or section 44ADA is liable to pay 100% of advance tax by 15th March.
Advance tax due dates
- 15% of the advance tax should be paid on or before 15 June of the financial year.
- 45% of the advance tax (less tax already paid) should be paid on or before 15 September.
- 75% of the advance tax (less tax already paid) should be paid on or before 15 December.
- 100% of the advance tax (less tax already paid) should be paid on or before 15 March.
For assessees covered under section 44AD and section 44ADA (under presumptive taxation scheme) of the income-tax Act, 1961, are required to pay advance tax on or before 15th March.
How to compute advance tax on capital gains income?
Advance tax is payable on total income which includes capital gains and casual income (i.e., income from lotteries, crossword puzzles, etc.).
According to the Income tax FAQ page, “However, it is practically not possible to estimate the income from capital gain and casual income in advance. Therefore, in such cases it is provided that if any such income arises after the due date of any instalment, then the tax calculated on capital gain and casual income shall be paid in remaining instalments of advance tax which are due If the entire amount of tax is so paid then no interest for late payment is levied.”
In case of advance tax, when is assessee considered as assesse-in-default??
According to the Income tax FAQ page, “For the purpose of advance tax, an assessee will be considered as assesse-in-default if he does not pay the advance tax on receiving the order from Income-tax officer as per the due dates, or does not file an intimation in Form 28A before the instalment due date.”