Every person whose estimated tax liability for the year is Rs10,000/- or more in the financial year has to pay advance tax on their current income. Estimated tax liability is derived after adjusting TDS and TCS. We will discuss what advance tax is, who is required to pay advance tax, how it is calculated, is advance tax deducted from salary, whether one can claim deductions under sections 80C to 80 U before computing advance tax, how to pay advance tax online, can it be paid thru cheque and how to download the receipt.
Advance tax means the previous year’s tax is paid in the last year only, i.e. tax paid on income for the period 1.04.23 to 31.03.2024 before 31st March 2024, will be called an advance tax, as per section 207 of Income tax, it means pay as you earn in the same financial year, if paid on 1.04.2025 or after, it will be called as self assessment tax.
As per Law, income generated in the previous year,2023-24, is taxed at the time of filing of the Tax return in the next year, i.e. in 2024-25, the tax paid in 2024-25 is called self-assessment tax.
Govt collects tax through TDS, Advance Tax or Self-assessment tax.
The advance tax came into force in 1997, if tax is not deposited till 31st March of a particular financial year then interest @1% per month has to be deposited under section 234C and 234B( levied for tax deposited after 31st March till the return filing date), if tax is not deposited till the return filing date ( 31st July or 31st October) then for period after return filing date interest @1% per month will be levied u/s234A.
Every person whose estimated tax liability for the financial year is Rs10,000/- or more in a financial year has to pay advance tax on his current income, payment of tax in the same year it is earned. The advance tax provides a continuous flow of income to Govt, reducing the burden of paying tax at a lumpsum for the individual. Section 207 to Section 219 of the income tax Act defines the provision of advance tax.
Advance tax Instalments
The due date for payment of instalments of advance tax is mentioned below; if not paid on time, interest @ 1% per month will be applicable as per Section 234C( interest on instalment delayed)
| Period | Pay(%) | Interest applicable Even if delay is of one day | No interest to be paid, if paid on due date |
| By15 th June | 15% of taxable amount | 3 months | If paid on or before the due date & even if 12% of the taxable amount, no interest will be charged u/section 234C |
| By15 th Sept | 45% of taxable amount | 3 months | If paid on or before the due date & even if 36% of a taxable amount, no interest will be charged u/section 234C |
| By 15 th Dec | 75% of taxable amount | 3 months | No rebate |
| By 15 th March | 100% of taxable amount | 1 month | If 90% of the taxable amount is paid till 31st March, no interest will be charged u/section 234B |
Senior citizen(above 60 years during the financial year) not having any income from business and profession is exempted from paying advance tax.
If 90% of the taxable amount is paid by 31st March, no interest will be charged u/section 234B for the latter payment of 10% in the next financial year.
The taxpayer who has opted for presumptive taxation 44AD and 44 ADA can pay 100% of the advance tax amount by 15th March of the financial year, with no need to pay in between. ( only one instalment), but if paid on 16 the March then interest@1% per month has to be paid u/s 234C on due amount.
If advance tax is not deposited on the due date, then interest is charged under Section 234C and will be regarded as an assessee in default.
The assessing officer may, under section 210(3), serve an order latest by February end of the financial year if he feels so, based on regular assessment ( based on last year’s income tax return of the assessee), that the assessee had failed to deposit advance tax ., Assessee may file his justification of not depositing advance tax under section 28A, provide one’s estimate, and if feels that he is supposed to deposit higher amount of advance tax as compared to demanded by assessing officer, should deposit the higher amount.
If one defaults in payment of advance tax ( i.e. either pays less advance tax or pays after 31st March of the financial year then interest @ 1% per month will be applicable on the taxable amount due; one day delay will result in payment of interest of one month, under section 234B of Income Tax.
In case one pays 90% of the taxable amount as advance tax as of 31st March of the financial year, then no interest will be payable under Section 234B of income tax on 10% of the pending taxable amount; interest has to be paid under Section 234A of Income tax @ 1% if the pending amount is not paid till filing the return of income.
TDS deducted during the financial year will be reduced from taxable amount due to be payable as advance tax
lets understand with the help of example:-
If A has an Income of Rs13,50,000/- during the financial year FY 2022-23, TDS deducted is Rs1,00,000/; the return was filed on 05/08/2023 , and the remaining tax was deposited on 5/08/2023.
Advance tax paid by A are as under :-
| Month | Amount ( Rs) |
| On 20 th June,2022 | 20,000 |
| On 10 th Sep, 2022 | 10,000 |
| On 30 th Dec, 2022 | 30,000 |
| On 15 th March,2023 | 15,000 |
Taxable Income of A under old regime will come as under:-
| Income slab ( Rs) | Tax Amount ( Rs) |
| up to 2,50,000 | NIL |
| 2,50,00 to 5,00,000 | 12,500 |
| 5,00,000 to 10,00,000 | 1,00,000 |
| Above 10,00,000 | 1,05,000 |
| Cess @ 4% | 8,700 |
Total taxable amount for FY 2022-23 comes to Rs2,26,200/-, have to deduct TDS amount of Rs1,00,000/-
Net taxable amount on which advance tax was supposed to be deducted will be Rs 1,26,200.
| Month | Advance tax to be paid (Rs) | Advance Tax paid ( Rs) | Interest ( Rs) |
| 15 th June 2022 | 18,930, Round off to 18,900 as per Income Tax Rule 119A (18900-0)= on 18900@1%*3month | NIL | 567 |
| 15 th Sep 2022 | 56790, Round off to 56,700 as per Income Tax Rule 119A(56700-20000-10000)= on 26700 @1%*3months | 30,000 | 801 |
| 15 th Dec 2022 | 94,650, Round off to 94,600 as per Income Tax Rule 119A (94600-30000)=64600@1%*3month | 30,000 | 1938 |
| 15 th March 2023 | 1,26,200,Round off to 1,26,200 as per Income Tax Rule 119A ( 126200-20000-10000-30000-15000)=51200@1%*1month | 75,000 | 512 |
Total interest under Section 234 C will be Rs3,818/- ( interest charged for non-payment or less payment for15June,15 Sept and ,15 Dec will be @1% and charged for three months every quarter, and for 15 March it will be @1% for one month.
The tax amount unpaid as on 31st March 2023 is Rs51200/-, and this amount was deposited on 5/08/2023, interest @ 1% per month will be charged on Rs51200/- under section 234 B for five months amounting to Rs2560/-
If, as on 31st March 2023, 90% or more amount was paid, i.e. if Rs1,13,580/- or more was paid ,than no interest would have been charged on the balance amount under section 234B.
As the Income tax return was filed on 5/08/2023 and the prescribed due date of return is 31/07/2023, interest under section 234A will be charged for one month @ 1% per month; the interest amount will be Rs512/- ( pending amount as of 31/03/2023 is Rs51220 /- and the due date for the return is 31st July 2023 but which was filed on 5/08/2023 delay of 5 days).
Interest is levied under three sections are as under:-
- Section 234A,delay in filing return of Income.
- Section 234B,non-payment or short payment of advance tax.
- Section234C, delay on advance tax instalments.
Interest under Section 234C will not be applicable as per law but portal shows the liability, better to pay.
- Amount received as capital gain, sale of shares, etc.
- Winning from lottery, crossword puzzle, etc.
- Dividend income under section 22, (a,b,c,d).
- Any income under business and profession accrued for the first time.
Lets understand with example:-
If A has to pay a tax of Rs89960 and paid advance tax till 12th March 2023as per the required three instalments, but on13th March 2023, received income from capital gain or won from lottery or dividend income. The tax liability of A will increase, but will he not be liable to pay interest as per section 234C on less advance tax instalment ( due to additional income received in the previous year)of 15th June22, 15th Sep22 and 15thDec22 but has to pay the difference amount of advance tax liability now arisen due to income from capital gain or dividend income or winning from the lottery on following instalment of 15th March22 if income was received on 17th March23, then pay the differential amount of advance tax liability on or before 31st March 23. For example, if tax liability has increased on 12th March 23 by Rs50,000 due to additional income, then must pay this on 15th March 23, if doesn’t pay on 15th March 23, then interest under 234C will be applicable.
How to pay Advance Tax online, Can it be paid thru cheque
- Go to Google
- Type income tax.gov.in
- Log in, type PAN no and Password
- Go to e file, then to e-pay tax, new payment
- Choose Income tax, advance tax
- Choose Assessment year, will show financial year also
- Choose minor head 100 for advance tax, continue
- Mention tax amount, continue
- Multi option for payment( net banking, debit card, pay at bank counter, RTGS/NEFT, Payment Gateway) .
- If want to pay thru cash or cheque then select pay at bank counter,
- In pay at bank counter, three option cash, cheque, demand draft, can pay in cash if amount up to Rs10,000. For corporates and persons for which audit is applicable E- payment is mandatory.
- Select Payment Gateway if not able to locate one’s scheduled bank; different payments options are there, do continue, will show tax challan, say pay now, continue, terms & conditions, say I agree, submit to bank, continue, multiple payment options, select and pay.
- Will redirect to the main page, will mention challan paid and can download the challan
- Advance tax paid will be reflected in AIS.
FAQ
Is Advance Tax deducted from Salary
In standard cases, TDS is deducted from salary, but if one has income from business and profession or capital gain along with salary income, then advance tax has to be computed on the additional income,
Can I Claim deductions ( 80C to 80U) before calculating Advance tax
Yes, one claims deduction before computing Advance tax.
Advance Tax is computed on net taxable income after adjusting deductions; In addition to deductions (80C to 80U), TDS and TCS are also deducted from the taxable amount before computing advance tax, i.e. if the taxable income of A is Rs1,00,000, TDS Rs15,000, and TCS Rs 2,500, advance tax payable will be ( 1,00,000-15,000-2,500) amounting to Rs 82,500.
How to calculate Advance Tax
Advance tax can be calculated after last year’s sales, income, profit, and expenses analysis. New trends are being followed in the current year, any update in technology in the current year or a Government scheme which can increase income or reduce expense and by what percentage is to be taken into consideration, detail of TDS & TCS of last year and chances this year.