Understanding Advance Tax
Advance tax follows the “pay-as-you-earn” principle, requiring taxpayers to pay their income tax in installments throughout the financial year rather than at the end. It applies to individuals and businesses with an estimated tax liability exceeding ₹10,000 in a financial year. However, senior citizens (aged 60 or above) who do not earn income from business or profession are exempt.
Steps to Calculate Advance Tax
Advance tax computation varies for each taxpayer, but the general steps are as follows:
Estimate Total Income – Identify income from all five sources:
- Salary
- House property
- Business or profession
- Capital gains
- Other sources (e.g., interest, dividends)
Deduct Exemptions and Deductions – Apply applicable tax deductions under sections like 80C, 80D, etc.
Compute Net Taxable Income – Subtract deductions from total income.
Calculate Tax Liability – Apply the relevant tax rates under the old or new tax regime.
Adjust for TDS/TCS – Subtract any tax already deducted at source. The remaining tax amount is the advance tax liability.
Advance Tax Payment Due Dates
For Individuals & Corporates
| Installment | Due Date | Percentage of Tax Payable |
|---|---|---|
| 1st Installment | 15th June | 15% of total tax liability |
| 2nd Installment | 15th September | 45% of total tax liability (minus previous payment) |
| 3rd Installment | 15th December | 75% of total tax liability (minus previous payments) |
| 4th Installment | 15th March | 100% of total tax liability (minus previous payments) |
For Presumptive Taxation Scheme (Sec 44AD/44ADA)
- Due Date: 15th March
- Tax Payable: 100% of the estimated tax liability
How to Pay Advance Tax?
Online Payment Process
- Visit the official income tax portal: https://www.incometax.gov.in/iec/foportal/
- Click on ‘e-Pay Tax’ under ‘Quick Links.’
- Enter PAN and mobile number, verify OTP, and proceed.
- Select Assessment Year and Advance Tax (100) as the payment type.
- Input the tax amount, then choose payment mode (Net Banking, Credit/Debit Card).
- Confirm details and complete the payment.
Offline Payment Process
- Obtain Challan 280 from an authorized bank.
- Fill in details such as PAN, Assessment Year, and tax amount.
- Submit the challan along with payment at the bank.
By understanding these steps, taxpayers can ensure timely compliance and avoid interest or penalties for late payments.
