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How To Calculate and Pay Advance Tax

An advance tax is a tax that is payable on total income of the year earned from different sources including your salary, business profession, rent etc during the financial year. This tax has to be paid by the end of the year. The advance tax is payable if the tax liability exceeds Rs 10,000 in a financial year.

The advance is applicable for a person if he/she has other sources of income other than the salary. If one is earning through the capital gains, interests on investments, house property, lottery or business. Any rebate due to attracts an interest rate of 0.5 percent of every month and six percent annually in case of the income tax refund. A fine of one percent every month and 12 percent every year if you do not pay your advance tax on time.


Who needs to File For Advance Tax?

Advance Tax is not applicable for Salaried Class i.e. they need not pay the advance tax because they are already paying tax at source. The employer deducts the tax at source from his/her salary. If in case the person is earning money from other sources then he/she has to pay or file an advance tax.

Some of the income sources that can attract Advance Tax

  • Income received through capital gains on shares
  • Interests earned on fixed deposits
  • Winnings earned from the lottery.
  • Rent or income earned from the house property.

Salaried, Freelancers or Businessman- If your tax liability is more than Rs 10,000 in a financial year and you are not getting the income tax deducted at source then you need to pay an Advance Tax. Senior citizens who are above 60 years of age, and do not run any business are exempted from paying this tax.

Presumptive Business- If the business income assumes to be 8% of turnover then they are exempted from the tax. This was applicable for 2014-15 and 2015-16 taxable year.

Presumptive Business for 2016-17- Starting financial year tax payers who opt for the presumptive scheme have to pay a whole amount of their advance tax in one installment on or before 15th March. The businesses with the turnover of Rs 2 Crores or less can opt for this scheme.

For Financial Year 2016-17- this scheme has been extended to professionals such as doctors, professors, lawyers, architects etc if their total income is 50 Lakhs or less than such types of tax payers have to pay tax on the quarterly basis that is quarterly installments.

When to File For Advance Tax

The Advance Tax or the self-assessment tax have to be paid on 15th September, December, and March in installments of 30% and 40% respectively. This scheme is applicable for the non-corporate. Whereas, the corporate need to pay their advance tax on 15th June, December, and March.

How To Pay Advance Tax

There are two modes of paying

  1. You can pay through the tax payment challans at the bank branches which are specially authorized by the Income Tax Department. It can be deposited by the authorized banks such as ICICI Bank, Reserve Bank of India, State bank of India, HDFC Banks, Allahabad Banks and much more.
  2. Another mode of paying advance tax is by paying it online through the official websites of Income Tax Department and National Securities Depository.

Online Method of Paying Advance Tax

The Advance Tax Challan 280 allows people to pay their income tax online on the official website of Income Tax Department. The individual have to visit the official website and select the challan and fill in the form with required details and use it to pay the tax online. You can also make the payment offline by downloading the challan from the Income Tax Welcome and fill it and submit in the bank.

The online tax can be paid online. This online facility is provided by the Income Tax Department. Listed below are the steps how to make payment for the advance tax online.

  • Visit the official website: www.nsdl.co.in
  • Select the right challan to pay your advance tax.
  • Provide the form with the correct details. The information include right assessment year, address, phone number, e-mail address, bank name, captcha code and other important details.
  • Once you are done with the details filing, you are then redirected to the payments page. The bank offers the Net Banking mode. Make sure that you recheck the amount that is shown on the screen.
  • Next, you’ll get the details of the payment done including the challan number.
  • It is important to report your payment after you are done with the payment. You can do this by adding an additional entry under the paid tax page.

Late Payment of Advance Tax

If the individual forgets to pay the advance tax before the deadline, then he will be charged with the interest. The individual will be charged at 1% on the defaulted amount every month until and unless the tax is paid off completely. The same interest penalty is applicable if the tax is not paid during the second and third deadline.

Calculating Advance Tax

An individual can calculate the advance tax on their own. Below listed are the steps where you can calculate the advance tax

Determine the income- Determine the income you receive other than your salary. It is important to include any ongoing agreements that might pay out later.

Minus the expenses- Deduct the expenses from the income. You can deduct the expenses related to your work especially “freelancing” such as rent of the work, place, travel, expense, internet and phone costs.

Sum up the Income- Add other income like the payments you receive from rent, interest income etc.  Then deduct the TDS from your salaried income.

Total Resulted Advance Tax– If the tax amount exceeds to Rs 10,000 then you receive the total advance tax.

Advance Tax Schedule

Listed below is the advance tax schedule for the Financial Year. As per earlier advance tax and tax schedule-

Due Dates Estimated Income For the Whole Year Advance Tax Paid of the Estimated Income Advance tax payable on actual income Shortfall in advance tax payment  

Interest u/s 234C

By 15th of June Rs 1200000 0 0 0 0
By 15th of Sept Rs 1500000 84975 131325 46350 1400
By 15th of Dec Rs 1700000 207030 262650 55620 1700
By 15th of March Rs 200000 437750 437750 0 0
Total 3100

As per the New Advance Tax Schedule and Tax Laws for the Financial Year 2017-18-

Due Dates Estimated Income For the Whole Year Advance Tax Paid of the Estimated Income Advance tax payable on actual income Shortfall in advance tax payment  

Interest u/s 234C

By 15th of June Rs 1200000 28580 65660 37080 1100
By 15th of Sept Rs 1500000 127460 196990 69530 2100
By 15th of Dec Rs 1700000 258790 328310 69520 2100
By 15th of March Rs 200000 437750 437750 0 0
Total 5300

The amendment has increased from Rs 3100 to Rs 5300. That means there is a hike of 71% of the interest burden on the tax-payer.

Refund of Advance Tax

At the end of the year, if the Income Tax Department knows that you have paid more tax than you should have paid then the department will refund the extra amount. The taxpayers can claim their refund by filing and submitting a Form 30. The claim has to be done within a year period from the last year of the assessment year.

Form 30- It is a claim request where the excess tax paid is refunded. The claim request form must be submitted by the person by the end of the financial year. The request is accompanied by a return in the form.

Advance Tax Benefits

  • Helps in reducing the stress of the tax payers.
  • It boosts up the tax collection process.
  • It increases the Government Funds, as the Government can earn interest on the collected amount.
  • Advance Tax saves people from defaulting on their tax payments.
  • It manages the business as well as their finances and provides an idea of the income they have earned throughout the year.

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