Call Everything you need to know about advance tax
Advance tax, also known as “pay-as-you-earn” tax, is the income tax payable in advance by taxpayers on their estimated income for the current financial year, where this tax is paid in instalments instead of paying a lump sum tax at the end of the year. Section 208 and Section 209 of Income Tax talks about the levy of advance tax and its computations.
Advance tax payments are applicable to all types of taxpayers whose tax liability for the financial year exceeds Rs.10,000. Advance tax is paid in India for several reasons, primarily to ensure a smooth and regular inflow of revenue for the government. Timely Collection of Revenue, Reduction of Tax Evasion, Cash Flow Management and promoting financial discipline in the taxpayers are of the primary intentions behind implementing advance tax provisions.
Who pays advance tax?
Every salaried individual, HUF, Firm, companies etc. or businesses having their total tax liability of Rs.10,000 or more in a financial year are required to follow provisions related to advance tax.
Senior citizens having income from business or profession are also liable to pay advance tax.
When someone opts for presumptive income type, they have an option to pay entire advance tax amount in one instalment on or before 15th of March of every financial year. They also have the option to pay all their tax dues by 31 March.
What are the due dates for payment of Advance Tax for FY 2024-25:
| Due Date | Advance Tax in % |
| On or before 15th June | 15% of advance tax liability |
| On or before 15th September | 45% of advance tax liability |
| On or before 15th December | 75% of advance tax liability |
| On or before 15th March | 100% of advance tax liability |
| On or before 15th March | 100 % of advance tax liability in one instalment for Presumptive Scheme |
How to pay Advance Tax online?
To pay your advance tax liability, you need to login to your income tax portal and select e-pay tax. After entering all the basic information required, you must select relevant assessment year for which you are paying the advance tax.
Based upon the type of taxpayer, major head 0020 or 0021 is to be selected for paying the advance tax and minor head for advance tax to be selected is 100. Advance tax payment is done with Challan no.280.
What happens if advance tax is not paid?
Non-payment of advance tax attracts interest under section 234B and delay in advance tax payment will attract interest under section 234C.
If 90% of advance tax liability is not paid by 31st March then interest @1% will be levied upon the remaining tax amount. Interest under section 234C is also levied @1% per month for the delay in payment.
Conclusion:
Advance tax ensures a regular inflow of revenue for the government and helps taxpayers manage their tax liabilities more effectively by spreading them out over the year. It also promotes tax compliance and timely payment of taxes. Understanding and complying with advance tax provisions is essential for taxpayers to avoid interest and penalties levied for non-compliance with the Income Tax Act. Timely payments on due dates for paying advance tax is crucial to avoid any non-compliance penalties.
About Author:
CA Chinmay Shirish Agate
Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.