Are you liable to pay advance tax? Key points to know

If your tax liability exceeds ₹10,000, you must pay advance tax in the upcoming assessment year, but in the same financial year.
 

Our income in a Financial Year (FY) gets taxed in the assessment year (AY), which follows the Financial Year. For example, our total income earned in the FY 2021-22 (1st April 2021 – 31st March 2022) will be taxed and assessed in the AY 2022-2023 (1st April 2022 – 31st March 2023).

What is advance tax?
 

Section 208 of the Income Tax Act, 1961 mandates the payment of “advance tax” for every individual whose tax liability for a certain financial year is more than or equal to ₹10,000. However, resident senior citizens, i.e., individuals aged 60 years or above during the relevant financial year, are exempt from paying advance tax.

An important detail when paying advance tax is that an individual whose tax liability is above ₹10,000 is supposed to pay it in the same financial year by calculating the total income they will earn in the entire financial year. Based on this calculation, one can estimate whether they need to pay advance tax and, if yes, can estimate the amount to be paid.

How to calculate advance tax?
 

Several factors go into calculating an individual’s advance tax. These include their net taxable income, income tax, surcharge, education cess, secondary and higher education cess, their total tax liability, relief, and Tax Deducted at Source (TDS)/ Tax Collected at Source (TCS) / Minimum Alternate Tax (MAT).

The Income Tax Department’s website helps you compute your advance tax using an online calculator if you have these details handy. If you aren’t sure about some of these details, you can still calculate your income tax yourself.

When is one’s advance tax payment due?
 

There is a fixed timeline to be followed to make your advance tax payments. 15% of your advance tax is payable on or before 15th June of the current FY. 45% of it should be paid on or before 15th September and increases to 75% on or before 15th December. The deadline is 15th March, by when you should have completed your advance tax payment.

Hence, if your total advance income tax liability is ₹1,00,000, ₹15,000 should be paid by 15th June, ₹45,000 by 15th September, ₹75,000 by 15th September and ₹1,00,000 by 15th December.

To pay advance tax, the Challan No is the form that you will need to fill out on these dates. ITNS 280 form. You will be required to provide your PAN details, select the correct AY, and select the type of payment. After you make this payment, a Challan Identification Number (CIN) will be provided to you. It must be preserved and produced while filing Income Tax returns.

Can I pay advance tax on a later (or earlier) date?
 

No. A penalty is levied in the form of interest under Sections 234B and 234C of the Income Tax Act upon missing the payment dates of advance tax.

Can I pay advance income tax online?
 

Yes. You can pay advance tax online by visiting the Income Tax Department’s official website. IDFC FIRST Bank can also help make your income tax filing process uncomplicated and hassle-free. You can pay income tax online by filling out the relevant forms and selecting the respective challan on our site.

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