What is Advance Tax & Who Should Pay Advance Tax?
What is Advance Tax?
Advance tax is the Income Tax that is paid in advance instead of lump sum payment at year end. It is the tax that you pay as you earn. These payments have to be made in instalments as per due dates provided by the income tax department.
Watch this video to find out more.
Who Should Pay Advance Tax?
Salaried, freelancers and businesses– If your total tax liability is Rs 10,000 or more in a financial year you have to pay advance tax. The advance tax applies to all taxpayers, salaried, freelancers, and businesses.
Senior citizens– People aged 60 years or more, and do not run a business, are exempt from paying advance tax. So only senior citizens (60 years or more) having business income must pay advance tax
Presumptive income for businesses–The taxpayers who have opted for the presumptive taxation scheme under section 44AD have to pay the whole amount of their advance tax in one instalment on or before 15 March. They also have the option to pay all of their tax dues by 31 March.
Presumptive income for professionals– Independent professionals such as doctors, lawyers, architects, etc. come under the presumptive scheme under Section 44ADA. They have to pay the whole of their advance tax liability in one instalment on or before 15 March. They can also pay the entire amount by 31 March.
Advance Tax Due Dates For FY 2022-23
FY 2022-23 for both individual and corporate taxpayers
| Due Date | Advance Tax Payment Percentage |
|---|---|
| On or before 15th June | 15% of advance tax |
| On or before 15th September | 45% of advance tax less advance tax already paid |
| On or before 15th December | 75% of advance tax less advance tax already paid |
| On or before 15th March | 100% of advance tax less advance tax already paid |
For taxpayers who have opted for Presumptive Taxation Scheme under sections 44AD & 44ADA – Business Income
| Due Date | Advance Tax Payment Percentage |
|---|---|
| On or before 15th March | 100% of advance tax |
Our tax experts will calculate your advance tax liability so you can pay your dues on time.
How to Pay Advance Tax Online?
1. Visit the e-filing portal of the Income Tax Department of India
2. On the left side of the home page, there is a 'Quick Links' section, click on the 'e-Pay Tax' option. You can also search for 'e-Pay Tax' in the search bar.
3. On this page, enter your PAN and re-enter to confirm it. Then, enter your mobile number and click on ‘Continue’.
4. Now enter the 6-digit OTP received on your mobile number and 'Continue'.
5. Select the first box labelled as ‘Income Tax’ and click on ‘Proceed’
6. Select the ‘Assessment Year’ as 2024-25 and ‘Type of Payment’ as ‘Advance Tax (100)’ and click on 'Continue'.
7. Enter all the tax details
8. Select the payment method and the bank and press 'Continue'.
9. Preview the challan details and click on ‘Pay Now’. You may also ‘Edit’ these details if required.
13. After completing the payment, you will get an acknowledgement on the next screen. You can see the BSR code and challan serial number on the right side of the challan. Save a copy of this tax receipt for future reference. You will need to enter the BSR code and challan number in your tax return.
13. After completing the payment, you will get an acknowledgement on the next screen. You can see the BSR code and challan serial number on the right side of the challan. Save a copy of this tax receipt for future reference. You will need to enter the BSR code and challan number in your tax return.
What is Advance Tax Late Payment Interest?
Interest on advance tax:
Non-payment of advance tax will attract interest under 234B: As per Section 234B, you must pay at least 90% of the total taxes as advance tax by 31st March. Failure to make advance tax payments will result in an interest @ 1% on the unpaid amount.
Delay in payment of advance tax will attract interest under 234C:
| Particulars | Rate of Interest | Period of Interest | Amount on which interest is calculated |
| If Advance Tax paid by 15th June is less than 15% | 1% per month | 3 months | 15% of Amount* (-) tax paid before June 15 |
| If Advance Tax paid by 15th September is less than 45% | 1% per month | 3 months | 45% of Amount* (-) tax paid before September 15 |
| If Advance Tax paid by 15th December is less than 75% | 1% per month | 3 months | 75% of Amount* (-) tax paid before December 15 |
| If 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
We will explain the calculation by way of an example. Ajay is a freelancer earning income from the profession of interior decoration. For the FY 2022-23, Ajay estimates his annual gross receipts at Rs 20,00,000. Ajay estimates his expenses at Rs 12,00,000. Ajay has deposited Rs 40,000 in PPF account. Ajay has also paid Rs 25,000 towards the LIC premium. Further, Ajay has paid Rs 12,000 towards the medical insurance premiums. Professional receipts of Ajay are subject to TDS. Ajay estimates a TDS of Rs 30,000 on certain professional receipts for the FY 2022-23. Besides professional receipts, Ajay estimates an interest of Rs 10,000 on fixed deposits held by him. Ajay’s advance tax liability would be as below:
| INCOME ESTIMATION FOR ADVANCE TAX | AMOUNT (Rs) | AMOUNT (Rs) |
| Income from profession: | ||
| Gross receipts | 20,00,000 | |
| Less: Expenses | 12,00,000 | 8,00,000 |
| Income from other sources: | ||
| Interest from fixed deposit | 10,000 | |
| GROSS TOTAL INCOME | 8,10,000 | |
| Less: Deduction under section 80C | ||
| Contribution to PPF | 40,000 | |
| LIC premium | 25,000 | |
| 65,000 | ||
| Deduction under section 80D | 12,000 | 77,000 |
| TOTAL INCOME | 7,33,000 | |
| TAX PAYABLE | 59,100 | |
| Add: Education cess @ 4% | 2,364 | |
| 61,464 | ||
| Less: TDS | 30,000 | |
| TAX PAYABLE IN ADVANCE | 31,464 |
| ADVANCE TAX PAYMENTS | ||
|---|---|---|
| Due date | Advance tax payable | Amount (Rs) |
| 15th June | 15% of Advance tax | 4,700 |
| 15th September | 45% of Advance tax | 14,100 |
| 15th December | 75% of Advance tax | 23,600 |
| 15th March | 100% of Advance tax | 31,400 |
FAQs on Advance Tax Payment:
When should I pay advance tax?
If your tax liability for a year after reducing TDS exceeds Rs 10,000, you will be liable for payment of advance tax
Is an NRI liable for payment of advance tax?
An NRI, who has an income accruing in India in excess of Rs 10,000, is liable for payment of advance tax.
I am a senior citizen with pension and interest income. Should I pay advance tax?
Resident senior citizens not having income from business or profession are not liable for advance tax.
Will I be Penalized if I do not pay advance tax?
Non payment of advance tax will result in levy of interest under 234B and 234C of the Income tax Act, 1961.
Can I claim deduction under 80C while estimating income for determining my advance tax?
Yes. You can consider all these deductions while estimating your income for the year for computing your advance tax liability.
What happens if I miss the deadline for payment of the fourth installment of my advance tax i.e. on 15 March
You can still go ahead with payment of advance tax on or before the 31 March of the year. Such payment will still be treated as advance tax only.
How do I make an advance tax payment?
Advance tax payment is made using Challan 280 just like any other regular tax payment. You may read our detailed article on online payment of income tax.
Why should advance tax payments be made?
Advance tax payments benefit both the government and the individual/organisation paying it. From the government’s perspective, it provides a continuous flow of income throughout the year. From the individual/organisation’s perspective, it reduces the year-end burden of paying taxes in a lump sum. Non-payment of advance tax could result in the taxpayer being liable to interest under the Income Tax law. Hence, timely payments of advance tax should be made.
How to check advance tax payment status?
To check the status of your advance tax payment challan, go to https://tin.tin.nsdl.com/oltas/index.html. Select CIN (Challan Identification Number) Based View. Then enter the required details being asked for, in order to view the status. You can also check the list of advance tax payments made by logging in to your income tax account at https://www.incometaxindiaefiling.gov.in/home and going to My account -> View Form 26AS (Tax Credit), and entering the financial year and type of view/download.
How to write a cheque for advance tax payment?
Taxpayers can pay advance tax both online and offline. For offline payments, the challan can be downloaded at https://www.incometaxindia.gov.in/Forms/107010000000345598.pdf Once downloaded, the details listed should be filled up, keeping in mind the following instructions-
- A separate challan should be used for each type of payment.
- Quoting the Permanent Account Number (PAN) is mandatory. Quoting a false PAN may attract a penalty of Rs. 10,000 as per section 272B of the Income Tax Act, 1961.
- Taxpayers should draw/issue the cheque/DDs towards payment of income tax as under –
Pay _________________ (Name of the bank where the Challan is being deposited) A/c Income-tax. - Taxpayers should ensure that the bank’s acknowledgement contains the (1) BSR code of the bank branch, (2) the Date of deposit of challan, and the (3) the Challan serial number, as these details will have to be quoted in the Income Tax Return.
How to download the advance income tax challan?
To view the advance tax payment challan, go to https://tin.tin.nsdl.com/oltas/index.html. Select CIN (Challan Identification Number) Based View. Enter the required details, and click on ‘View’. Once the challan details are displayed on the screen, you can either print out the same or save a screenshot. Taxpayers can also download the advance tax payment receipt/challan by visiting the website of the bank through which the advance tax payment was made. An option will be available to download the advance payment receipt.
Can I pay advance tax after the due date?
You must pay advance tax before the financial year ends in 4 instalments: 15th June, 15th September, 15th December and 15th March. If advance tax is not paid according to this schedule, then 1% monthly interest will be levied.
How to pay advance tax for capital gains?
You must pay advance tax on Capital gains. However, it is not possible to accurately predict the amount of capital gain in advance. Therefore, if you earn capital gains after the advance tax due date, you may choose to pay the advance tax in the remaining instalments.
How to pay advance tax through SBI?
Use the advance tax calculator to calculate your exact tax amount and click on ‘Pay on Government Website’ button > Select ‘challan 280’ > Fill up all the details (watch this video for complete details) > Under net banking, select ‘SBI’ and make the payment.
How to pay advance tax online through hdfc bank
To pay advance tax through HDFC bank, follow these steps:
- Use the advance tax calculator to calculate your exact tax amount and click on ‘Pay on Government Website’ button
- Select ‘challan 280’
- Fill up all the details
- Under net banking, select ‘HDFC’ and make the payment
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