Advance Tax Payments in India: Step-by-Step Guide 2024

Advance Tax Payments in India: Step-by-Step Guide 2024

Dreaded tax season is approaching. As an Indian taxpayer, advance knowledge of your tax payment obligations can save you from scrambling last-minute and accruing interest charges.

This comprehensive guide by Filingwala.com will equip you with everything you need to know about advance tax payments – due dates, eligibility, calculation, payment procedure and more. Read on to become an advance tax payment expert!

You might be wondering – what exactly is advance tax? Simply put, it is income tax paid during the current financial year itself instead of a lump sum at the year end. Payment is made in instalments on prescribed due dates.

Advance tax applies to all taxpayers – salaried individuals, freelancers and businesses – with a total tax liability exceeding Rs 10,000 in a financial year. The only exception is for senior citizens who do not have business income. They don’t need to pay advance tax.

Timely payment saves you from paying interest under sections 234B and 234C of the Income Tax Act. You can calculate your liability using the Advance Tax Calculator and pay online through netbanking or debit card on the e-filing portal.

This guide covers everything from eligibility criteria, due dates and late payment interest to step-by-step payment procedure. You’ll also find a detailed example of advance tax calculation and expert responses to frequently asked questions.

By the end, paying advance tax will no longer overwhelm you. Our filing and accounting specialists at Filingwala.com can also help compute your liability and ensure optimized tax savings.

So grab a cuppa, put your feet up, and let’s get started!

What is Advance Tax?

Advance tax refers to the income tax that taxpayers have to pay in the current year itself – during the financial year for which it is due – instead of making a lump sum payment on or after the year ends.

It is essentially paying taxes on your estimated total income as you earn, at prescribed due dates during the financial year. It is tax that you prepay based on income projections rather than income already earned. This relieves you from paying the bulk of your tax liability at one go after end of the financial year.

Who proposed the concept of advance tax and why was it introduced in India in the first place? Well, the Raja Chelliah Committee appointed by CBDT in 1991 to revamp India’s tax policies realized that most individuals and businesses tended to defer tax payments until after income tax return filing days leading to a resource crunch for the government towards financial year closing.

To ensure a steady stream of tax collections across the year, the committee introduced an Advance Tax system. It recommended the concept of pay-as-you-earn tax similar to many developed economies. Their proposals were included in Finance Act 1992 leading to insertion of Sections 207 to 219 in the Income Tax Act 1961 which contain the statutory provisions related to liability of advance tax, due dates for installments and interest implications.

Advance tax applies to all income tax assessees, from salaried employees to freelancers to businesses, if the estimated tax liability for the relevant financial year after accounting for TDS exceeds Rs 10,000. Specific due dates are prescribed for payment of advance tax during the year for relevant categories of taxpayers.

Calculating advance tax involves estimating your total income from all likely sources (salary, business, interest, capital gains etc.) in the current financial year and deducting all tax exemptions, allowances and deductions you are eligible for. The tax rate slabs can then be applied to arrive at total tax payable. Deduct TDS already paid or expected for the year. If the net tax payable exceeds Rs 10,000 you have to make advance payments. You can use our user-friendly Advance Tax Calculator to crunch the numbers.

Who Should Pay Advance Tax?

Advance tax provisions apply to all categories of income tax assessees – salaried employees, self-employed professionals and businesses – if their tax liability for the year is expected to exceed Rs 10,000.

Salaried Individuals

Salaried employees whose estimated total taxable income including salary, interest income, rental income etc. for a financial year exceeds the basic exemption limit have to pay advance tax. This is regardless of whether TDS has been deducted on their income.

Freelancers

Self-employed professionals like doctors, lawyers, architects, interior designers etc. with an estimated gross annual income of over Rs 2.5 lakh come under the advance tax ambit. You have to pay even if you opt for presumptive taxation schemes under Section 44ADA or 44AD.

Businesses

All types of businesses – sole proprietorships, partnerships, LLPs and private limited companies – have to pay advance tax if their expected tax liability for the year exceeds Rs 10,000. This includes presumptive taxation schemes under Section 44AD and 44ADA.

Senior Citizens

Senior citizens (aged 60 years or above) having income only from pensions, interests, rentals etc. are exempt. However, senior citizens who run a business or profession have to pay advance tax just like other taxpayers.

Other Scenarios

Non-Resident Indians (NRIs) are also liable to pay advance tax in India on income accrued in the country beyond the basic exemption threshold.

Overseas citizens of India (OCIs) and foreign nationals earning Indian income are subject to the same advance tax provisions as resident Indians based on their income slab and sources of income.

The important thing is to correctly estimate your overall income and tax liability for the financial year. Our Advance Tax Calculator does this automatically for you. If the payable tax amount exceeds Rs 10,000 even after TDS deductions, you have to pay advance tax as per eligibility.

Next, let’s look at the due dates for payment.

Advance Tax Due Dates For FY 2023-24

The tax liability for a financial year is not supposed to be paid in one installment. Rather, it must be paid in a phased manner on specific due dates during the year for timely compliance.

There are four advance tax instalment dates prescribed by the Income Tax Department for both individual and corporate taxpayers in India:

  1. On or before 15th June – Minimum 15% of total advance tax must be paid
  2. On or before 15th September – Minimum 45% of total advance tax must be paid
  3. On or before 15th December – Minimum 75% of total advance tax must be paid
  4. On or before 15th March – Full 100% of total advance tax must be paid

Taxpayers who have opted for the Presumptive Taxation Scheme under Sections 44AD and 44ADA pertaining to certain businesses and professionals respectively have to pay the entire advance tax amount in one instalment on or before 15th March. They can also settle full tax dues by 31st March.

With the due dates clearly specified well ahead of time, you now have no excuse for not planning your advance tax payments on time. Missed deadlines attract interest!

Let’s next look at the step-by-step procedure for online payment of advance tax.

How to Pay Advance Tax Online

Paying advance tax manually by visiting the bank can get tedious. Fortunately, the income tax e-filing website allows convenient online payment through netbanking, debit/credit card, UPI and popular e-wallets. Follow these 12 simple steps to pay your advance tax online in under 5 minutes!

Step 1: Visit e-filing Portal

Go to www.incometax.gov.in – the tax-filing website run by the Income Tax Department of India. All major tax payments can be made from here.

Step 2: Click e-Pay Tax under Quick Links

Find the Quick Links section on left sidebar of homepage. Click on ‘e-Pay Tax’ option under ‘Pay Taxes’. Alternatively, search for it in site search bar.

Step 3: Enter PAN and Other Details

On e-Pay Tax page, provide your 10-digit Permanent Account Number (PAN) twice. Then enter your mobile number and email ID before clicking ‘Continue’.

Step 4: Validate with OTP

You will receive a 6-digit OTP on your mobile number. Enter this for verification and click Continue.

Step 5: Select Assessment Year and Payment Type

Select current Assessment Year as 2023-2024. For payment type, tick ‘Advance Tax’ and click Continue.

Step 6: Enter Advance Tax Details

On next page, provide required payment details – bank name, amount payable, date etc. and click Continue.

Step 7: Select Payment Mode

Choose your preferred payment method – credit/debit card, internet banking or UPI apps. Enter details and click Continue.

Step 8: Verify Tax Challan Details

Preview entire tax challan before payment to ensure correctness. Make modifications if needed by clicking ‘Edit’.

Step 9: Click Pay Now

If all details are in order, click ‘Confirm’ followed by ‘Pay Now’ to proceed with payment.

Step 10: Select Bank/Wallet

Your preferred bank/UPI app page will open. Enter credentials and authorize payment from your account.

Step 11: Save Acknowledgement

Payment completion will redirect you back to e-filing site with payment acknowledgement containing CIN, payment details etc. as receipt. Save soft or hard copy.

Step 12: Verify Form 26AS

Login to e-filing account after few days to view Form 26AS and ensure entry reflecting against PAN before ITR filing.

With these simple steps, paying advance tax online is no longer tedious!

What is Advance Tax Late Payment Interest?

Advance tax payments as per due dates are mandatory to avoid getting penalized under the Income Tax Act, 1961. Delay or short payment of installments attracts hefty interest to be borne by defaulters!

Interest under Section 234B You must pay at least 90% of your final tax liability for a financial year through TDS, advance tax and self-assessment tax before 31st March. If advance/self-assessment tax paid till 31st March is less than 90% of total tax due, interest under Section 234B is levied at 1% per month (i.e. 12% per annum) on shortfall amount.

Here’s an example to understand this better:

Suppose your gross tax liability for FY 2022-23 was calculated as Rs 1,00,000 at filing ITR. After reckoning TDS of Rs 30,000, the net tax payable is Rs 70,000.

Now as per Section 234B, you need to pay 90% of the tax due amount before 31st March 2023.

90% of 1,00,000 comes to Rs 90,000

You had paid Rs 50,000 as advance tax instalments. Accounting for TDS, you paid Rs 80,000 (50,000 plus 30,000).

This is less than 90% of tax due. So interest @1% per month will apply on shortfall of Rs 10,000 (Rs 90,000 minus Rs 80,000)

Interest under Section 234C In addition to mandatory 90% tax payment by March end, paying advance tax as per the scheduled instalment structure is also crucial to avoid interest levied under Section 234C.

It specifies payment due dates during the year and applies interest on deferred or short payment of each instalment:


Here are the two sets of data presented in proper table formats:

Table 1 – Interest Calculation as per Section 234C

Installment Due DateInterest RatePeriodAmount on which Interest Calculated
1st – 15th June1% per monthFor 3 months15% of tax due minus advance tax paid
2nd – 15th Sept1% per monthFor 3 months45% of tax due minus advance tax paid
3rd – 15th Dec1% per monthFor 3 months75% of tax due minus advance tax paid
4th–15th March1% per monthFor 1 month only100% of tax due minus advance tax paid

So both Sections 234B and 234C have to be accounted to calculate total interest payable on advance/self-assessment tax shortfall. Our user-friendly Advance Tax Calculator does all calculations for you!

Example for Advance Tax Calculation

To better understand advance tax computation, let’s take an example of Raj, an interior designer earning professional fees and interest income.

Raj estimates his gross receipt from interior design services in FY 2023-24 to be Rs 22 lakhs. He expects 25% of this i.e. Rs 5.5 lakhs as business expenses. He has invested Rs 50,000 in tax-saving fixed deposits which will earn Rs 4500 interest this year.

He has paid Rs 21,000 premium towards his life insurance policy and invested Rs 1.5 lakhs in ELSS mutual funds under Section 80C. Raj also contributes Rs 22,000 to his parents’ health insurance.

TDS of Rs 52,000 would be deducted on his professional receipts. What is Raj’s advance tax payable?

Step 1: Estimate Total Income

Particulars Amount (Rs) Professional Receipts 22,00,000 Less: Business Expenses @25% (5,50,000) Net Professional Income 16,50,000 Income from Other Sources Interest Income from FD 4,500
Gross Total Income 16,54,500

Step 2: Calculate Deductions Section 80C Deductions Life Insurance Premium 21,000 ELSS Investment 1,50,000 1,71,000 Section 80D Health Insurance Premium for Parents 22,000 Total Deductions 1,93,000

Step 3: Taxable Income, Tax and Rebate Gross Total Income 16,54,500 Less: Deductions u/s 80C and 80D (1,93,000) Taxable Income 14,61,500 Tax on Rs 14,61,500 @ old tax regime 1,37,800 Add: Health & Education Cess @4% 5,512 Total Tax Liability 1,43,312 Less: Rebate u/s 87A (max Rs 12,500) (12,500) Net Tax Liability 1,30,812

Step 4: Advance Tax Calculation Net Tax Liability 1,30,812 Less: Expected TDS 52,000 Net Tax Payable as Advance Tax 78,812

Table 2 – Advance Tax Payment by Raj

Due DateAdvance Tax PayablePaid
15th June, 202315% of 78,812 = 11,82211,822
15th Sept, 202345% of 78,812 = 35,46535,465
15th Dec, 202375% of 78,812 = 59,10959,109
15th March 2024100% of 78,812 = 78,81278,812

Thus, Raj has to pay Rs 78,812 as total advance tax for FY 2023-24 in above installments. Using our online calculator simplifies calculations!

FAQs on Advance Tax Payment

Confused about your advance tax requirements? Here we answer some most frequently asked questions to resolve common taxpayer doubts:

Q1. What is the last date for payment of advance tax?

The last/final due date for making advance tax payment is 15th March of the relevant financial year.

Q2. Is advance tax applicable on income earned between 15th March and 31st March?

Advance tax is levied on income that accrues till 31st March. So any income arising in the period 15th March to 31st March will also attract advance tax if yearly tax liability exceeds Rs 10,000.

Q3. How do I calculate interest payable on non-payment of advance tax?

Interest will be calculated as per Section 234B (no payment by March 31st) and Section 234C (default on instalment due dates) at applicable rates on shortfall amount for specified period. Our Advance Tax Calculator automatically computes any interest payable based on inputs.

Q4. I missed an advance tax instalment. What should I do?

Immediately pay the due amount with default interest in the next instalment. Also reassess your income and tax estimate for the year to ensure sufficient overall advance tax payment by 31st March so that no further interest arises.

Q5. I have capital gains income this year but no estimate earlier. Do I still need to pay advance tax?

Yes. Even if capital gains materialize after advance tax due dates, you are liable to cover it under subsequent instalments before 31st March to avoid interest implications.

Q6. I have refund due from last year ITR. Can I adjust it against advance tax dues?

Yes, you can adjust any refund amount eligible from past assessment years or previous quarters against advance tax payable for current fiscal without paying it again. The process can be completed online or through Form 18.

Q7. I am a senior citizen with income below taxable limit. Is advance tax applicable?

No, a senior citizen need not pay any advance tax, provided he does not have any income under the head “Profits and Gains of Business or Profession”.

Q8. My calculated advance tax amount & tax deducted by company are same. Still should I pay?

You must pay estimated advance tax even if it equals TDS already deducted on your income during the year. Default consequences apply only when advance tax paid till 31st March is less than 90% of total tax due for that financial year.

Q9. I have income under presumptive taxation sections 44ADA & 44AD. Which rate should be considered for advance tax calculation?

You can pay advance tax based on normal rates on estimated profits for the year from business or profession. Final taxes will get calculated as per applicable presumptive rate at the time of filing ITR.

Q10. I wish to pay additional advance tax over my computed amount as a precaution. Is this allowed?

Yes, you can pay any additional amount towards advance tax at your discretion to avoid default interest applicable when net tax paid is less than 90% of gross liability.

Q11. I failed to pay last instalment of advance tax due. What recourse do I have?

Even if you miss final instalment deadline of 15th March, you can pay due advance tax amounts by 31st March duly factoring any interest under Sections 234B and 234C to avoid compounding thereafter.

Q12. Where is advance tax indicated in Form 16 and ITR 1?

Your Form 26AS has details of all advance, self-assessment and TDS tax payments. In ITR 1, details have to be provided in Schedules IT and TDS 2 where tax payments can be claimed.

Conclusion

Advance tax can seem intimidating to individual taxpayers who are used to set-it-and-forget-it TDS deductions. However, as discussed through the article, there is a logical system and schedule in place to ensure paying taxes is not an overwhelming year end burden.

Planning is key – have clarity about income projections for the year, exclude all deductions you qualify for, compute tax and divide liability in aligned instalments on due dates. Automated tools like our user-friendly Advance Tax Calculator simplify calculations while avoiding errors or interest implications.

You can also seek expert assistance from professional tax consultants like those at Filingwala.com. Their CA advisors can hand-hold through apt tax planning, choosing correct regimes, identifying deductions eligible for, ensuring accurate tax payments – all while legally optimizing your savings!

So gear up to pay taxes like a seasoned adult this year. Being organized, well prepared and seeking help when needed will make you feel in control on top of your finances. Here’s raising a mocktail – to improved tax compliance and having additional peace of mind!

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