Advance Income Tax

Advance Income Tax

 

Advance Tax Due Dates For FY 2023-24

 

Due Date Advance Tax Payment Percentage
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax less advance tax already paid
On or before 15th December 75% of advance tax less advance tax already paid
On or before 15th March 100% of advance tax less advance tax already paid

What is Advance Tax?

Advance tax is the income tax that is paid in advance instead of lump sum payment at year end. It is the tax that you pay as you earn. These payments have to be made in instalments as per due dates provided by the income tax department.

Advance tax is a system of paying income tax in instalments throughout the year rather than in one lump sum at the end of the financial year while filing ITR.

 

Who Should 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, in the form of “advance tax”

 

Salaried, freelancers and businesses– If your total tax liability is Rs 10,000 or more in a financial year you have to pay advance tax. The advance tax applies to all taxpayers, salaried, freelancers, and businesses.

 

Person not liable to pay advance tax

Senior citizens– People aged 60 years or more, and do not run a business, are exempt from paying advance tax. So only senior citizens (60 years or more) having business income must pay advance tax

 

Advance tax for business / profession under presumptive taxation:

Presumptive income for businesses–The taxpayers who have opted for the presumptive taxation scheme under section 44AD have to pay the whole amount of their advance tax in one instalment on or before 15 March. They also have the option to pay all of their tax dues by 31 March.

 

Presumptive income for professionals– Independent professionals such as doctors, lawyers, architects, etc. come under the presumptive scheme under section 44ADA. They have to pay the whole of their advance tax liability in one instalment on or before 15 March. They can also pay the entire amount by 31 March.

 

 

Consequences of non-payment of Advance Income Tax:

 

Section 234B – Penalty for Not Paying Advance Tax Payment

The penalty under Section 234B of the Income Tax Act is applicable if:

  • A taxpayer has failed to pay advance tax though he is liable to pay advance tax; or
  • The advance tax paid by the taxpayer is less than 90% of the assessed tax.

 

Under section 234B, interest for default in payment of advance tax is levied at 1% simple interest per month or part of a month. The penalty interest is levied on the amount of unpaid advance tax. If there is a shortfall in payment of advance tax, then interest is levied on the amount by which advance tax is short paid.

 

Sec 234C – Penalty for Short Payment of Advance Tax Payment

Penal interest would be payable on the amount of advance tax payment short paid at the rate of 1% simple interest per month. Interest under section 234C is levied for a period of 3 months, in case of shortfall in payment of 1st, 2nd and 3rd instalment and for 1 month, in case of shortfall in payment of the last instalment.

Calculation of interest under sec 234C

Particulars Rate of Interest Period of Interest Amount on which interest is calculated
If Advance Tax paid on or before June 15 is less than 15% 1% per month 3 months 15% of Amount* (-) tax paid before June 15
If Advance Tax paid on or before September 15 is less than 45% 1% per month 3 months 45% of Amount* (-) tax paid before September 15
If Advance Tax paid on or before December 15 is less than 75% 1% per month 3 months 75% of Amount* (-) tax paid before December 15
If Advance Tax paid on or before March 15 is less than 100% 1% per month 1 month 100% of Amount* (-) tax paid before March 15

 

Updated on 07.06.2023

Disclaimer: This document contains information in summary form and is therefore intended to provide updates and general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgement. We are not, by any means of this document, rendering any professional advice or services. We shall not be liable for any claims or losses of any nature, arising directly or indirectly from use of the data or material or any information in this document. On any specific matter, reference should be made to the appropriate advisor.

 

Leave a Reply

Your email address will not be published. Required fields are marked *