amount of advance tax is Income tax Which should be paid in advance during the financial year instead of paying the lump sum amount at the end. Otherwise known as ‘Pay As You Earning Tax’, advance tax is paid in installments during the financial year. Simply put, advance tax is calculated on the income of the taxpayer in the same financial year.
Who needs to pay advance tax?
As per section 208 of the Income Tax Act, a taxpayer is required to pay advance tax if his tax liability is Rs 10,000 or more in a financial year. For a salaried person, it is necessary to pay advance tax. Those who are self-employed or earn from other sources such as deposits, rent, capital gains from stocks or mutual funds, also have to pay advance tax. senior citizens Those who are above 60 years of age are exempted from this rule if they do not have any income from business or profession.
When do you have to pay advance tax?
Every individual is required to calculate his income and tax liability and pay advance tax in four installments throughout the financial year. At least 15 per cent of advance tax should be paid on or before 15th June of every financial year. Forty-five percent of advance tax should be paid on or before September 15. Individuals will have to pay 75 per cent of the advance tax on or before December 15. Taxpayers will have to pay 100% of the advance tax liability by March 15. financial year.
how to calculate advance tax
Let us understand how to calculate advance tax on your income in a financial year
First, estimate the total income earned from salary and other sources. Now, add up the income from all sources including salary and interest from fixed deposits, rent etc. From this amount, deduct other expenses such as medical insurance premiums, tax-saving investments, amount spent on travel and phone bills. Now, calculate the income tax liability on the total taxable income. If the tax liability exceeds Rs 10,000 after considering tax deducted at source or TDS and tax collected at source or TCS, then you have to pay advance tax.
What happens if you do not pay advance tax
Individuals have to pay penalty under sections 234B and 234C of the Income Tax Act for default in payment of advance tax.
a) If a taxpayer fails to deposit advance tax or less than 90 per cent of the total tax liability, interest will be charged at 1 per cent per month or part of the month from April to the date of payment of tax, as prescribed under the Income Tax Act. As per section 234B.
b) If the advance tax paid in any installment is less than the prescribed percentage of the installment amount, interest will be charged as per section 234C of the Income Tax Act. Example: If advance tax paid on or before 15th June is less than 15 per cent of the total tax liability, then interest of one per cent will be charged on 15 per cent of the total liability less the amount paid before the due date. three months.
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