Income tax: In India, advance tax refers to 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.
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.
If the amount of tax exceeds Rs 10,000 per year, taxpayers will have to pay advance tax in quarterly installments (June, September, December and March).
self assessment tax Means the amount that a taxpayer pays on expected income after deducting advance tax and tax deducted at source (TDS).
It refers to the additional tax paid by an individual or entity to the government after computing their total tax liability for a particular financial year. This is usually done when the taxpayer finds that the tax already paid, either through TDS (tax deducted at source) or advance tax, is less than the actual tax liability.
Read also: Income Tax Return: Who is eligible to file ITR 1 Sahaj Form?
Self-assessment tax is calculated based on the income tax rates and rules applicable for that particular financial year. The taxpayer can pay self-assessment tax online through the website of the Income Tax Department or by visiting a designated bank branch.
Any tax paid on or before March 31 is treated as advance tax paid during the same financial year. Advance tax is deposited through ITNS 280 challan by ticking the relevant column i.e. advance tax.
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 this part you can find various provisions relating to payment of advance tax by the taxpayer.
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
How is self-assessment tax calculated and paid?
self assessment tax calculation: After you fill your ITR form with TDS and advance tax details (if paid), the system calculates your income and checks whether tax is still payable or not. You have to pay it and then fill in the challan details in the return before submitting it.
Who is not liable to pay advance tax?
A resident senior citizen (i.e., a person aged 60 years or more during the relevant financial year) who does not have any income from business or profession is not liable to pay advance tax.
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