Many of us have additional sources of income other than salary like income from interest, dividend, rental income, capital gains, etc. Where TDS is deducted by the employer from the Salary every month, we often forget to account for the tax on other additional incomes. And due to this, we may end up paying interest on the unpaid tax at the time of filing the income tax return. So, let's avoid paying interest by paying our advance tax.
What is Advance Tax?
Sometimes, we are required to pay the tax during the financial year itself. This tax is called Advance Tax.
Who should pay Advance Tax?
After accounting for the TDS deducted from the salary, if the tax payable (i.e. tax still to be paid) at the end of the financial year is expected to be more than Rs.10,000, the individual shall pay the Advance Tax.
How to calculate Advance Tax?
- Calculate total income for the year from all the sources including salary.
- Calculate the Tax Liability on total income as per the applicable tax slabs.
- Deduct the TDS applicable on salary for the year from the Tax Liability.
- If the balance is more than Rs.10,000, the individual is liable to pay this by way of Advance Tax.
When and how much advance tax is to be paid?
- On or before the 15th June – Not less than 15% of advance tax
- On or before the 15th September – Not less than 45% of advance tax, as reduced by the amount, if any, paid in the earlier instalment
- On or before the 15th December – Not less than 75% of advance tax, as reduced by the amounts, if any, paid in the earlier instalments
- On or before the 15th March – The whole amount of advance tax, as reduced by the amounts, if any, paid in the earlier instalments
Any amount paid by way of advance tax on or before the 31st March is treated as advance tax paid during the financial year.
What if Advance Tax is not paid on time?
If advance tax is not paid as per the prescribed rates at the given timelines, the taxpayer is liable to pay interest on the shortfall (i.e. unpaid advance tax) at the simple interest of 1% per month till the applicable advance tax is paid.
What if tax paid is more than the tax liability?
If the total tax paid, including TDS and advance tax, is more than the total tax liability, the excess amount is refunded to the taxpayer. If the amount of refund is more than 10% of the total tax liability, a simple interest at the rate of 0.5% per month is also paid.
To whom Advance Tax is not applicable?
Individual who is of the age of 60 years or more.
How to pay Advance Tax?
- Go to Income Tax Department’s e-filing portal https://www.incometax.gov.in/iec/foportal/.
- Go to ‘Quick Links’ and click on ‘e-Pay Tax’.
- Enter your PAN and mobile number. Click on ‘Continue’.
- OTP will be sent to your mobile number. Enter the OTP and click on ‘Continue’.
- Check your details and click on ‘Continue’.
- Go to section for ‘Income Tax’ and click on ‘Proceed’.
- Select applicable ‘Assessment Year’ from the dropdown list’. Assessment Year is the year following the financial year in which the income is earned. For eg. if the income is earned in the year 2021-22, the Assessment Year will be 2022-23.
- For ‘Type of Payment (Minor Head)’, select ‘Advance Tax’ from the dropdown list. Click on ‘Continue’.
- Enter the Advance Tax amount and click on ‘Continue’.
- Select mode of payment and click on ‘Continue’.
- Check the details and click on ‘Pay Now’.
- Tick the box agreeing to the terms and conditions and click on ‘Submit To Bank’.
- Make the payment.
- After successful payment, you will be redirected to Income Tax Department’s e-filing portal.
- Download the Tax Challan for future reference.
How to check Advance Taxes paid during the year?
The advance taxes paid during the year can be checked through Annual Information Statement (AIS).
- Login to Income Tax Department’s e-filing portal https://www.incometax.gov.in/iec/foportal/.
- Go to ‘AIS’ tab and click on ‘Proceed’.
- You will be redirected to Income Tax Department’s compliance portal. Click on ‘AIS’ which is next to ‘Instructions’.
- Select the financial year.
- Go to ‘Annual Information Statement (AIS)’ section and click on the download symbol.
- Go to ‘Annual Information Statement (AIS) – PDF’ and click on ‘Download’.
- AIS is a password-protected PDF. The password is your PAN (in lower case) followed by your date of birth. For eg. if your PAN is ABCDE1234A and date of birth is January 01, 1990, then password will be abcde1234a01011990.
It may take a few days for your advance tax payment to be reflected in AIS.
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