Any amount which is paid as a tax on income earned or received, before the end of the financial year is called an advance tax. It is also called a ‘pay-as-you-earn’ scheme. As in case of salaried taxpayers, Tax is deducted by the employer on salary, so such salaried taxpayers are required to pay advance tax on income apart from salary if any and which is not reported to the employer.
Advance tax is mandatory only if Tax Liability is 10,000 or more. For computing tax liability, income for which tax is already deducted should be excluded.
Exemption for applicability
1. Resident Senior citizen and having Income from Business or Profession.
2. Assessee for whom Tax Liability is less than 10,000.
Due Date and Amount of Advance tax
|Due Date for a payment||Amount of Tax to be paid|
|On or before 15th June||At least 15% of tax liability|
|On or before 15th September||At least 45% of tax liability less previous Installment|
|On or before 15th December||At least 75% of tax liability less previous Installment|
|On or before 15th March||100% of tax liability less previous Installment|
- Advance tax is computed based on existing tax slab rates.
- The assessee who is opting presumptive taxation scheme has to pay its advance tax in one installment by 15th March
- While filing Income tax returns assessee need to fill the challan details of which advance tax was paid.
- Interest is charged if advance tax is not paid on or before the due date.
Interest for Non- Payment or Short-Payment of Advance TAX – Section 234B
Interest liability would be 1% per month or part of a month from 1st April following the financial year up to the date of determination and it would be attracted only if the advance tax paid is less than 90% assessed tax.
Interest payable on deferment of Advance TAX – Section 234 C
Interest liability would be a 1% of the difference between advance tax payable and advance tax paid.
Interest = [Advance Tax Payable – Advance Tax Paid ] * 1%
Tax Deducted at Source
The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get the credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.