What is Advance Tax?

Last Updated: 11 Oct 2024

An advance tax meaning is pay-as-you-earn plan, is simply paying tax obligations ahead of time at the end of a fiscal year. It is due when a person’s tax liability in a given fiscal year reaches Rs. 10,000. Notably, this type of tax is paid in the year that the revenue is created and is paid in instalments on due dates.

Since it makes it easier for the government to receive money year-round, it is thought to be advantageous. The amount of advance tax that must be paid can be changed if the taxpayer’s estimated income changes once the instalment is made.

It should be mentioned that different taxpayer groups have varied amounts of advance tax due on different days. Additionally, non-resident Indians (NRIs) who have earned more than Rs. 10,000 in India are required to pay income tax in advance.

Benefits of Paying Advance Tax

Some of the advantages of paying advance tax are as follows: –

1. Organizational Financial Planning Advance tax payments give companies important information about their cash flow and overall financial health. Based on anticipated revenue and tax liabilities, this enables firms to efficiently budget and make educated decisions.
2. Government Revenue Generation The government receives income via advance tax payments, which also have the potential to earn interest. The extra money helps fund a range of public programs and services that benefit the entire community.
3. Avoidance of Late Payment Penalties Both individuals and corporations can stay in compliance with tax laws and avoid late payment penalties by paying their taxes in advance. With this proactive strategy, taxpayers are certain to satisfy their duties and avoid incurring needless financial penalties swiftly.
4. Accelerated Tax Collection The government collects income more quickly when advance tax payments are made. Authorities are able to more effectively manage their budget and distribute resources when they receive payments at various points during the fiscal year.
5. Decreased Financial Stress Taxpayers can avoid the anxiety of having to make hurried payments or worried about running out of money by paying their taxes in advance. With this proactive strategy, people and organizations may successfully organize their budgets without having to worry about approaching tax deadlines.

What is the Eligibility of Paying Advance Tax?

Consider paying advance tax when your total tax liability in a financial year exceeds INR 10,000. This is a general advance premium tax credit eligibility that applies to enterprises, freelancers, and salaried employees alike. It’s an essential component of financial responsibility for people and organizations with high incomes.

Senior Citizens’ Exemption

The good news is that those 60 years of age or older who do not conduct business are free from paying advance taxes. This sensible proposal offers relief from additional tax responsibilities while addressing the special conditions faced by senior folks.

Presumptive Revenue for Companies

Businesses that choose presumptive taxation are required by section 44AD of the tax code to complete their advance tax obligations by a specified date. By March 15th, the whole amount owed in taxes is due in one instalment. Nonetheless, there is leeway, permitting full payment by March 31st, offering a respectable period for adherence.

Presumptive Salary for Experts

Independent professions covered by the presumption framework described in section 44ADA include doctors, lawyers, and architects. They must pay out their advance tax liability by March 15th, just like corporations must. Alternatively, they can satisfy their commitments by March 31st, which will guarantee a reasonable amount of time to settle their tax obligations.

Advance Tax Due Dates for FY 2023-24

The deadline for paying the last instalment of advance taxes for the 2023–2024 fiscal year is March 15, 2024. Taxpayers are required to pay 100% of their advance tax liability on this day.

Tax Advance Payment for Companies

DUE DATE OF TAX INSTALMENTS	AMOUNT OF TAX PAYABLE
On or before the 15th of June	15%
On or before the 15th of September	45%
On or before the 15th of December	75%
On or before the 15th of March	100%

Tax Advance Payment for Business Owners as well as Self-employed

DUE DATE OF TAX INSTALMENTS	AMOUNT OF TAX PAYABLE
On or before the 15th of September	30%
On or before the 15th of December	60%
On or before the 15th of March	100%

How to Pay Advance Tax Online?

• Step-1 Visit the e-filing portal: Start by visiting the official site of the Income Tax Department.
• Step-2 Navigate to ‘e-Pay Tax’: Once you’re on the home page, look for the ‘Quick Links’ section on the left side. Click on the ‘e-Pay Tax’ option. If you can’t find it, you can also use the search bar to locate it.
• Step-3 Enter PAN and mobile number: On the ‘e-Pay Tax’ page, enter your PAN and confirm it. Then, provide your mobile number and click on ‘Continue.’
• Step-4 Verify OTP: You’ll receive a 6-digit OTP on your mobile number. Enter this OTP on the site and then click on ‘Continue’ to verify.
• Step-5 Select tax type: Choose the first option labelled as ‘Income Tax’ and click on ‘Proceed.’
• Step-6 Specify assessment year and payment type: Select the ‘Assessment Year’ as 2024-25 and choose the ‘Type of Payment’ as ‘Advance Tax (100)’. Then, click on ‘Continue’.
• Step-7 Enter tax details: Fill in all the required tax details accurately.
• Step-8 Select payment method and bank: Choose your preferred payment method and the bank you want to make the payment. Then, click on ‘Continue’.
• Step-9 Review and confirm: Take a moment to review the challan details. If everything looks correct, click on ‘Pay Now’. You can also edit the details if needed.
• Step-10 Make the payment: Follow the prompts to complete the online payment process securely.
• Step-11 Receive acknowledgement: Once the payment is successful, you’ll receive an acknowledgement on the next screen. Make sure to save a copy of the tax receipt for your records. You’ll need to enter the BSR code and challan number in your tax return.

Frequently Asked Questions

Can I revise my Advance Tax payment?

Yes, if there has been a change in your income or any other factors affecting your tax liability, you can revise your advance tax payment before the last instalment date. However, once the final instalment is paid, no further revisions can be made.

Can I claim a refund for any excess Advance Tax paid?

Yes, if you have paid more than the actual tax liability for the current year, you can claim a refund while filing the tax return

Is there any penalty for not paying Advance Tax?

Yes, if you are liable to pay Advance Tax and fail to do so, you will be charged with an interest of 1% per month on the outstanding amount.

Can I adjust my TDS against Advance Tax?

Yes, if your estimated tax liability is more than the TDS deducted from your income, you can adjust it against your Advance Tax payment. However, if your TDS is more than the estimated tax liability, you are not required to pay Advance Tax.