Any taxpayer whose estimated tax liability for a financial year is Rs. 10,000 or more is required to pay advance tax.
Advance tax payment: For salaried individuals, advance tax is paid by most employers through TDS.
income tax financial year 2022-23: In India, advance tax refers to the tax that is paid in advance by individuals, companies and businesses instead of waiting to pay in lump sum at the end of the financial year. Under the advance tax system, taxpayers are required to estimate their income for the financial year and calculate tax liability accordingly. Based on this estimate, he is required to pay tax in installments on specified due dates. These due dates are generally spread over the financial year and are determined by the Income Tax Department.
Read also: Easy ITR Filing: Step-by-Step Guide to Register on Income Tax Portal
Who is liable to pay advance tax?
As per section 208, every person whose estimated tax liability for the year is Rs.10,000 or more shall pay his tax in advance by way of advance tax.
In other words, if the estimated tax liability of the taxpayer is Rs. 10,000 or more, then he will have to discharge the tax liability in the form of advance tax to be paid in different instalments.
The following taxpayers are required to pay advance tax:
- salaried employee
- self-employed person
- occupations
- Trust
- partnership
For salaried individuals, advance tax is mostly taken care of by the employer through TDS. But other forms of income such as interest on savings bank accounts, fixed deposits, rental income, bonds, or capital gains increase the tax liability. One’s tax liability should be estimated well in advance.
How is advance tax calculated and paid?
Advance tax is calculated as under:
a) in the case of all assessees (other than eligible assessees referred to in section 44AD and 44ADA of the Income-tax Act):
- At least 15% on or before June 15
- At least 45% on or before 15th September
- At least 75% on or before 15th December
- 100% on or before March 15
b) In case of eligible assessee referred to in section 44AD and 44ADA: 100% on or before 15th March.
The presumptive taxation scheme of section 44AD is designed to provide relief to small taxpayers engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE).
The presumptive taxation scheme of section 44AD can be adopted by the following persons:
1) Resident individual
2) Resident Hindu Undivided Family
3) Resident Partnership Firm (Not Limited Liability Partnership Firm)
A person resident in India engaged in the following businesses can avail the benefits of section 44ADA:-
1) Legal
2) medicine
3) Engineering or Vastu
4) Accounts
5) Technical Consulting
6) Interior Decoration
7) Any other profession notified by CBDT
advance tax payment due date
The due dates for payment of various installments of advance tax in the case of all assessees (other than eligible assessees referred to in section 44AD or section 44ADA) are as follows:
First installment of advance tax is due June 15, Any taxpayer whose estimated tax liability for a financial year is Rs. 10,000 or more is required to pay advance tax. The due dates for the remaining installments are 15 September, 15 December and 15 March.
Advance tax penalty after due date
If a taxpayer fails to pay advance tax by the due date, he shall be liable to pay interest at the rate of 1% per month on the amount of tax due.
