What is advance tax?

15 September 2011 at 06:01 AM

Taxpayers are required to pay tax during the year on the basis of their own computation of income.
The advance tax is payable on total income of the year from all sources i.e. salary, business,
profession etc. (including capital gain, interest, rental income or lottery/prize money).
The advance tax is payable if it exceeds Rs.10,000 for the year.
In the case of an individual, advance tax needs to be deposited as below:

30% of advance tax payable on or before 15th September

60% of advance tax payable on or before 15th December
100% of advance tax payable on or before 15th March
What is the penalty for non deposit of advance tax?
In case of default in payment of advance tax, 1% p. m. interest is paid in addition to the tax payable
amount, under section:

234B - If you have not paid the advance tax i.e. 90% of total tax payable before 31st March.
234C - If you have not paid the installment in time i.e 30% before 15th Sept, 60% before 15 Dec and
balance before 15th March.

Who need not deposit advance tax?

If your total tax payable is below Rs 10,000, you are not obliged to deposit advance tax as per
income tax laws. Also, if your main source of income is salary and all other income (like interest) has
been declared to your employer, there is no need to deposit advance tax. However, salary income
needs to be included if salary details under the previous employer are not given to the new company
on joining.

What is advance tax and who should file it?

India Infoline News Service / 16:49 , May 07, 2013
Payment of tax liability by a person before the end of the financial year is called
advance tax..
As the name suggests, advance tax refers to paying a part of your taxes before the end of
the financial year. Also called pay-as-you-earn scheme, advance tax is the income tax
payable if your tax liability is more thanRs. 10,000 in a financial year. It should be paid in the
year
in
which
the
income
is
received.
Advance tax receipts help the government to get a constant flow of income throughout the
year so that expenses can be incurred rather than receiving all tax payments at the end of
the year. For instance: if your advance tax liability for the financial year 2011-12 has
exceeded Rs. 10,000,
you
are
expected
to
pay
it
in
FY11-12
itself.
Who

should

file

it?

If you are a salaried employee, you need not pay advance tax as your employer deducts tax
at source (TDS). Advance tax is applicable when an individual has sources of income other
than his salary. For instance, if an assessee earns income via capital gains on shares,
interest on fixed deposits, winnings from lottery or races, capital gains on house property
besides his regular business/salaried income then after adjusting for expenses or losses he
needs
to
pay
advance
tax.
Please note that advance tax is payable even by salaried employees on their other income.
While employers deduct TDS on salaries, advance tax is paid on income that is not subject
to TDS. Professionals (self-employed) and businessmen will have to pay taxes in advance
as, given their business income, the liability can be huge. The same implies for companies
and
corporates.
Payment of advance tax: Self employed and businessmen

Due date of installment

Amount payable

On or before 15th September

Not less than 30% of the advance

tax liability

On or before 15th December

Not less than 60% of the advance

tax liability

On or before 15th March

100% of the advance tax liability

Payment of advance tax: Companies

Due date of installment

Amount payable

On or before 15th June

Not less than 15% of the advance

tax liability

On or before 15th September

Not less than 45% of the advance

tax liability

On or before 15th December

Not less than 75% of the advance

tax liability

On or before 15th March

100% of the advance tax liability

Advance tax has to be paid on the 15th of September, December and March in
instalments of 30%, 30% and 40%, respectivelyfor self employed and businessman.
Companies need to pay it on the 15th of June, September, December and March.
How to file it?
Individuals may pay advance tax using tax payment challans at bank branches authorised
by the Income Tax (I-T) Department. It can be deposited with the Reserve Bank of India,
State Bank of India, ICICI Bank, HDFC Bank, Indian Overseas Bank, Indian Bank,
Allahabad Bank, Syndicate Bank, Axis Bank, Punjab National Bank, Punjab & Sindh Bank
and other authorised banks. There are 926 branches in India that can accept advance tax
payments. Individuals may also pay it online through the I-T department or the National
Securities Depository.
If you miss the deadline
If you fail to pay or the amount youve paid is less than the mandated 30% of the total
liability by the first deadline (15 September), you will need to pay an interest. This is
computed @ 1% simple interest per month on the defaulted amount for three months.
The same interest penalty would apply if you fail to pay the second deadline (15 December).
Failing to pay the third and last deadline (15 March) would mean paying 1% simple interest
on the defaulted amount for every month until the tax is fully paid.
What if advance tax paid is more than required?
If the amount paid as advance tax is higher than the total tax liability, the assessee will
receive the excess amount as a refund. Interest @ 6% per annum will be paid by the
Income Tax department to the assessee on the excess amount if the amount is more than
10% of tax liability.

Introduction to tax - Tax constitutes a major form of revenue for most of the
Governments across the world. Taxes are levied and spent by the government for the
development of the country like infrastructure, healthcare, defense etc. Taxes can be
categorized into two broad categories namely direct tax and indirect tax. A tax paid
directly by the person on whom it is levied is known as direct tax. Taxes where the
person paying and the person whom it is levied upon are two different people are an
indirect tax. Example of direct tax is income tax and an example of indirect tax is sales
tax.
Advance tax - Payment of tax liability by a person before the end of financial year is
called Advance tax. This is applicable only in case of Income tax of an individual or a
business entity. A simple question arises as why somebody would like to pay taxes in
advance.
Are you liable to pay advance tax?
Advance tax is payable only when an assessees total tax liability is exceeding Rs
10,000.
Advance tax Rates and Dates
For non corporate assessee installments of advance tax is to be paid as per the below

30% of tax payable should be paid as advance tax on or before 15th September

60% of tax payable should be paid as advance tax on or before 15th December

100% of tax payable should be paid as advance tax on or before 15th January

There are 4 installments of advance tax for corporate assessee.

15% of tax payable should be paid as advance tax on or before 15th June

45% of tax payable should be paid as advance tax on or before 15th September

75% of tax payable should be paid as advance tax on or before 15th December

100% of tax payable should be paid as advance tax on or before 15th March
Consequences of nonpayment of advance tax
If the amount of advance tax paid is less you will have to pay penalty interest as per the
below
For Non Corporate assessee

If advance tax paid in the first two installments is less than specified, simple interest @
1% per month is charged on the deficit amount for a period of 3 months.

If the aggregate of advance tax paid is less than 90% of tax payable on 15th March
penalty of simple interest @ 1% per month is charged on the amount shortfall until the
tax is paid
For Corporate assessee
Simple interest @ of 1% is charged on the deficit amount for a term of 3 months if you
have failed to pay advance tax or if advance tax paid is less than tax due as per the
above slab. For the 4th and final installment if the advance tax paid is less than 90% of
tax payable simple interest @ 1% per month is charged on the deficit from 1st April until
the tax is fully paid.
How to pay advance tax?
Advance tax can be paid online through the website of income tax department. It can
also be paid by filling challan, ITNS 280 and submitting it at designated branches of
specified banks. SBI, Corporation bank and ICICI are some of the banks that accept
advance tax payments.
What if Advance tax paid is more than required?
If the amount paid as advance tax is higher than the total tax liability, the assessee will
receive the excess amount as a refund. Interest @6% p.a will be paid by the income tax
department to the assessee on the excess amount if the excess amount is more than
10% of tax liability.

How to calculate Advance Tax?

After calculating the entire tax on the income of the F.Y. 2011-12, split it according to the percentage
of installment. See our article Advance Tax Installment and Due Dates.
For Example:

Mr. X calculate/estimate his income Rs.3,54,000/- for F.Y. 2012-13.

Tax on the income is 15,862.00/- (including surcharge and education Cess)

So Mr. X is liable to pay advance tax as his tax is more than Rs.10,000/-

Advance Tax is payable in this case is Rs.15862/-, but it is paid in installment, and installments will
be as follows.
1st installment by 15th Sept, 2012 (30% of 15862/-) = 4759/2nd installment by 15th Dec, 2012 (30% of 15852/-) = 4759/3rd installment by 15th March, 2012 (40% of 15862/-) = 6344/So in above example, in case of Mr. X re-estimates his income or earned the short-term or long term
income then Mr. X should revise the advance tax accordingly.

Mr. x is liable to pay interest u/s 234C for any short payment of advance tax.