Have you ever wondered how to avoid that end-of-year tax scramble? Enter advance tax payment! Think of it as spreading your tax burden like butter on toast – smooth and even throughout the year. But wait, there’s more! Not only does it save you from a hefty lump sum payment, but it also keeps pesky interest charges at bay.
Confused? Don’t worry; this blog is your one-stop shop for understanding advance tax slab in India. We’ll break down the who, what, when, and why, leaving you informed and empowered to navigate the tax world like a pro. So, buckle up and get ready to demystify Advance Tax, one instalment at a time!
What Is Advance Tax?
Advance payment of tax or advance tax payment is income tax you pay throughout the year rather than in one lump sum at the end. It’s like paying taxes as you earn. Instead of waiting until the end of the year, you make installment payments according to dates set by the income tax department.
Think of it as a “pay as you earn” system. If your estimated tax liability (after tax deducted at source) is over INR 10,000 in a financial year, you’re responsible for paying advance tax. This applies to everyone, from salaried individuals getting paid in crypto or fiat currencies to business owners and crypto traders.
Advance tax helps you avoid a large year-end tax bill and ensures a steady flow of income for the government. It’s beneficial for both sides!
Who Should Pay Advance Tax?
Here is a list of people liable to pay advance taxes in India.
Freelancers, Self-Employees and Businesses
Advance tax is a mandatory tax payment imposed by the government on individuals and businesses whose total tax liability for a financial year exceeds INR 10,000. This tax applies to all taxpayers, including salaried employees paid in crypto or fiat currencies, freelancers, crypto investors and businesses.
Exemption for Senior Citizens
However, there is an exemption for senior citizens aged 60 or older who do not operate a business. They are not required to pay advance tax. Only senior citizens with income from businesses are bound to pay advance taxes.
Presumptive Income Scheme for Businesses
Taxpayers who have chosen the assumptive tax scheme under section 44AD must pay their entire advance tax liability in one instalment on or before March 15 of the financial year. Alternatively, they can settle all their tax dues by March 31.
Presumptive Income Scheme for Professionals
Independent professionals such as lawyers, doctors, architects, and others falling under the presumptive scheme outlined in section 44ADA must clear their entire advance tax liability in a single instalment on or before March 15. Additionally, they retain the option to settle the total amount by March 31.
Advance Tax Due Dates 2023-24
For FY 2023-24, the advance tax due dates for both corporate and individual taxpayers are:
Due Date | Advance Tax Payment Percentage |
On or before 15th June | 15% of advance tax |
On or before 15th September | 45% of advance tax (-) advance tax already paid |
On or before 15th December | 75% of advance tax (-) advance tax already paid |
On or before 15th March | 100% of advance tax (-) advance tax already paid |
The advance tax payment dates for taxpayers who choose to participate in the Presumptive Taxation Scheme, specifically under sections 44AD and 44ADA, are:
Due Date | Advance Tax Payment Percentage |
On or before 15th March | 100% of advance tax |
How To Pay Advance Tax Online?
If you want to learn the steps to pay advance tax online, please follow the given steps:
1. Head over to the official e-filing portal of the Income Tax Department of India.
2. Navigate to the left-hand side of the homepage, where you’ll find a section labelled ‘Quick Links.’ Click on the option titled ‘e-Pay Tax.’ Alternatively, you can use the search bar for ‘e-Pay Tax.’
3.Input your PAN (Permanent Account Number) and re-enter it for confirmation on the provided fields. Then, provide your mobile number and proceed by clicking on the ‘Continue’ button.
4. Once done, you will receive a 6-digit OTP on your mobile number. Enter the same on the screen and hit “Continue.” Do keep in mind that the OTP is valid for only 15 minutes.
5. Choose the first checkbox labelled ‘Income Tax’ and then proceed by clicking the ‘Proceed’ button.
6. Choose the ‘Assessment Year’ option and set it to 2024-25. Next, select ‘Type of Payment’ and ‘Advance Tax (100)’. After making these selections, click the ‘Continue’ button to proceed.
7. Now, insert all the details asked on the screen carefully.
8. Once done, select the preferred mode of payment and click on the “Continue” option.
9. Review the challan details and then select the ‘Pay Now’ option. If necessary, you can also choose to ‘Edit’ these details before proceeding.
10. Once the payment process is finalised, you’ll receive an acknowledgement on the following screen. You’ll find the BSR code and the challan serial number on the right side of the challan. It’s essential to save a copy of this tax receipt for your records. Later, when filing your tax return, you’ll need to input the BSR code and the challan number.
So this is how you can make advance tax payment online by yourself.
What Is Advance Tax Late Payment Interest?
Non-payment of income tax advance tax payment will result in interest charges under Section 234B. According to Section 234B, it is required to pay at least 90% of the total taxes as advance tax by the 31st of March. Failing to make these advance tax payments will lead to an interest rate of 1% per month being applied to the unpaid amount.
Moreover, late payment of advance income tax will incur interest charges under Section 234C.
Particulars | Rate of Interest | Period of Interest | Amount on which interest is calculated |
If the Advance Tax paid by 15th June is less than 15% | 1% per month | 3 months | 15% of Amount* (-) tax paid before June 15 |
If the Advance Tax paid by 15th September is less than 45% | 1% per month | 3 months | 45% of Amount* (-) tax paid before September 15 |
If the Advance Tax paid by 15th December is less than 75% | 1% per month | 3 months | 75% of Amount* (-) tax paid before December 15 |
If the Advance Tax paid by 15th March is less than 100% | 1% per month | 1 month | 100% of Amount* (-) tax paid before March 15 |
Example For Advance Tax Calculation
Let’s illustrate the advance tax calculation with a scenario.
Meet Maya, a freelance graphic designer with an anticipated annual income of INR 18,00,000 for 2022-23. Maya expects her business expenses to total INR 10,00,000. She has contributed INR 35,000 to her PPF account and paid INR 20,000 towards her life insurance premium.
Additionally, Maya has paid INR 15,000 in medical insurance premiums. Some of Maya’s freelance income is subject to TDS, which she estimates is around INR 25,000. Apart from her freelance earnings, Maya expects to earn INR 8,000 in interest from her fixed deposits. Maya’s advance tax liability can be broken down as follows:
Income Estimation For Advance Tax | Amount (INR) | Amount (INR) Old Regime | Amount (INR) New Regime |
Income from the profession: | |||
Gross receipts | 18,00,000 | ||
Less: Expenses | 10,00,000 | 8,00,000 | 8,00,000 |
Income from other sources: | |||
Interest from fixed deposit | 8,000 | 8,000 | |
GROSS TOTAL INCOME | 808,000 | 808,000 | |
Less: Deduction under section 80C | |||
Contribution to PPF | 35,000 | ||
LIC premium | 20,000 | ||
55,000 | |||
Deduction under section 80D | 15,000 | ||
Less: Deduction U/S 80TTA | 8,000 | ||
GROSS TOTAL INCOME | 730,000 | 808,000 | |
TOTAL TAXABLE INCOME | 730,000 | 808,000 | |
Income tax able under Special rates | |||
Tax on Total Income | 58,500 | 50,800 | |
Tax on Special Rates @ 20% | – | – | |
Tax on Above | 58,500 | 50,800 | |
Less: Rebate u/s 87A | – | – | |
Add: Surcharge @ 10% | – | – | |
Add: Education Cess | 2,340 | 2,032 | |
Total Tax Payable | 60,840 | 52,832 | |
Less: TDS | 25,000 | 25,000 | |
Balance Tax Payable / (Refundable) | 35,840 | 27,832 | |
Interest U/S 234A | |||
Interest U/S 234B | |||
Interest U/S 234C | |||
Total Tax & Interest | 35,840 | 27,832 | |
Less: Self Assessment Tax Paid | |||
Balance Tax Payable / (Refundable) | 35,840 | 27,832 |
As per the due date, the income tax advance tax liability of Maya stands as the following:
Advance Tax Payments | |||
| Date | Tax Payable | Amount (INR) Old Regime | Amount (INR) New Regime |
15th June | 15% of Advance tax | 5,376 | 4175 |
15th September | 45% of Advance tax | 16,128 | 12524 |
15th December | 75% of Advance tax | 26,880 | 20874 |
15th March | 100% of Advance tax | 35840 | 27,832 |
How KoinX Can Help
If you are someone who is earning in cryptocurrency or trading in cryptocurrency, you can generate your crypto tax report with KoinX and know crypto tax liability to date. You can use this report to subsequently file your advance taxes for FY 2024-25.
Frequently Asked Questions
Below are the most asked questions related to advance tax payment:
When Do I Need To Pay Advance Tax?
You should pay advance tax if, after deducting TDS (Tax Deducted at Source), your total tax liability for the year is more than INR 10,000.
How Can I Fix An Error In My Advance Tax Challan?
If you’ve made a mistake in your advance tax online payment challan, don’t fret!
You can easily rectify it now. The Income Tax Department has introduced an online challan correction feature, allowing you to make adjustments to the assessment year, major head, and minor head (100 for Advance tax, 300 for self-assessment tax, and 400 for demand payment as regular assessment tax).
Changes to the assessment year must be done within 7 days of payment, while changes to the major head and minor head can be made within 30 days of payment.
How Can I Use The Challan Correction Feature?
Here’s how you can utilize the challan correction feature:
- Log in to the e-filing ITR portal.
- Navigate to the “Create Challan Correction Request” option on the webpage.
- Select the type of correction you must make:
- Assessment year,
- Major head, or
- Minor head.
- Enter the Assessment Year or the Challan Identification Number (CIN).
- Based on your selection, you’ll see specific CIN details or a list of challans for the chosen Assessment Year.
- Choose the relevant challan that requires correction.
- Input the correct information into the appropriate fields.
- Verify the correction using an Aadhaar OTP, Digital Signature Certificate (DSC), or Electronic Verification Code (EVC) through Net Banking, Demat, or your bank account.
- You’ll receive a confirmation message and a transaction ID upon successful verification. Keep this transaction ID handy for tracking the status of your correction request.
Is An NRI Required To Pay Advance Tax?
If an NRI earns income exceeding INR 10,000 in India, they are liable to pay advance tax.
Do I Need To Pay Advance Tax As A Senior Citizen Receiving Pension And Interest Income?
No, resident senior citizens without income from businesses or professions are exempt from advance income tax payment.
What Are The Consequences Of Not Paying Advance Tax?
Failure to pay advance tax may lead to the imposition of interest under sections 234B and 234C of the Income Tax Act, 1961.
What's The Purpose Of Making Advance Tax Payments?
Advance tax payment serve the interests of both the government and the taxpayers. For the government, it ensures a steady stream of revenue throughout the year. For individuals or organizations, it spreads out the tax burden, preventing a large sum from accumulating at the end of the fiscal year. Failing to make advance tax payments may lead to interest liabilities under Income Tax laws. Therefore, it’s essential to make timely advance tax payments to avoid such consequences.
How Can I Check My Advance Tax Payment Status?
To check your advance tax payment status please follow the given steps:
- Visit https://tin.tin.nsdl.com/oltas/index.html.
- Choose “CIN (Challan Identification Number) Based View.”
- Input the necessary details as requested to view the status.
- Alternatively, you can check the list of advance tax payments made by logging in to your income tax account at https://www.incometaxindiaefiling.gov.in/home.
- Navigate to “My Account” and select “View Form 26AS (Tax Credit).”
- Enter the financial year and choose the type of view/download you prefer. This will allow you to access your tax payment details.
Can I Write A Cheque For Advance Tax Payment?
Here’s how to write a cheque for advance tax payment:
taxpayers have the option to pay advance tax both online and offline. For offline payments, you can download the Challan from this link. Once downloaded, fill in the details provided, adhering to the following instructions:
- Use a separate challan for each type of payment.
- You must mention your Permanent Account Number (PAN). Providing a false PAN may result in a penalty of INR 10,000 under section 272B of the Income Tax Act, 1961.
- When drawing or issuing a cheque/DD (Demand Draft) for payment of income tax, make it payable to _________________ (Name of the bank where the Challan is being deposited) A/c Income-tax.
- Ensure that the bank’s acknowledgement includes the following details:
- The BSR code of the bank branch,
- The Date of deposit of the Challan, and
- The Challan serial number.
These details will be needed when filing your Income Tax Return.
Can I Pay Advance Tax After The Deadline?
You should clear your advance tax payment in four instalments before the financial year ends, with due dates on 15 June, 15 September, 15 December, and 15 March. If you miss these deadlines, you may still pay afterwards, but it’s important to note that a 1% monthly interest will be charged for the delay.
