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Provisions of Advance Tax under Income Tax

What is advance tax?

Advance tax means income tax should be paid in advance in installments as per the due dates prescribed by the income tax department. It is also known as pay as you earn tax. If the tax amounts to more than Rs 10,000/- per year, taxpayers need to pay advance tax in quarterly installments (June, September, December, and March). For salaried individuals, advance tax is mostly taken care of through TDS by employers. But other forms of income such as interest on savings bank accounts, fixed deposits, rental income, bonds, or capital gains increase the tax liability. One's tax liability needs to be estimated beforehand

For example, Mr. Vibhor (age 32 years) is running a confectionery shop. The turnover of his shop for the assessment year 2021-22 amounted to Rs. 45,00,000. His financials revealed a net profit of Rs. 2,80,000. In the given case, the taxable income of Mr. Vibhor is Rs. 2,80,000. As per current tax slabs, tax on Rs.2,80,000 will be Rs. NIL, hence, Mr. Vibhot is not liable to pay advance tax.


Recent updates

Budget 2021

Payment of advance tax on dividend income is required only after the declaration or payment of dividend.


Advance tax due dates for FY 2021-22

a) In case of all taxpayers for FY 2021-22 (other than the eligible assessees as referred to in section 44AD and 44ADA of the Income Tax Act):

Advance income tax payable

Due date

At least 15%

On or before 15th June

At least 45% less tax already paid

On or before 15th September

At least 75% less tax already paid

On or before 15th December​

100% less tax already paid

On or before 15th March

 

b) For the taxpayers covered under section 44AD and 44ADA:

Advance income tax payable

Due date

100%

On or before 15th March

 

For example, Mr. Anand is engaged in providing IT consultancy services. For the FY 2021-22 / AY 2022-23, his estimated tax liability is Rs 2.00,000. Mr. Anand has to pay advance tax in installments as given hereunder:

Advance income tax payable (Rs)

Due date

30,000 (15% of advance tax liability)

On or before 15th June

60,000 (90,000-30,000)

On or before 15th September

60,000 (1,50,000-90,000)

On or before 15th December​

50,000 (2,00,000-1,50,000)

On or before 15th March

 

Note - Any tax paid till 31st March will be treated as advance tax.  If the banks are closed on the last day for payment of any installment of advance tax, then the taxpayer should pay the advance tax on the immediately following working day

Mode of payment of advance tax

  • As per Rule 125 of the Income-tax Rules, 1962, a corporate taxpayer shall pay taxes through the electronic payment mode using the internet banking facility of the authorized banks.
  • Taxpayers other than a company, who are required to get their accounts audited, shall pay taxes through the electronic payment mode using the internet banking facility of the authorized banks.
  • Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. by depositing the challan at the receiving bank

Steps to make advance tax payment online

Step 1: Visit the Tax Information Network of the Income Tax Department of India.

Step 2: Click ‘Proceed’ under the CHALLAN NO./ITNS 280 option.

Step 3: On this Challan screen,

  • Select the tax applicable
  • Select type of payment,
  • Select mode of payment and bank name
  • Enter PAN,
  • Select assessment year
  • Fill in the address details
  • And, enter Captcha Code

Step 4: Click the "Proceed" button.

Step 5: You will be redirected to the bank’s website to complete the tax payment.

Step 6: After making the payment, you will get a payment receipt on the next screen. Save a copy of this tax payment receipt for future reference.

Consequences of non-payment of advance tax

  • As per section 234B of the Income Tax Act, if the taxpayer fails to less than 90% of total tax dues before the FY ends, he will liable to pay interest at the rate of 1% on tax dues.
  • As per section 234C of the Income Tax Act, if the taxpayer fails to make a quarterly advance tax payment, he will liable to pay 1% per month for a period of 3 months.

Downloads

Advance Tax Challan ITNS 280 in PDF Advance Tax Challan ITNS 280 in Excel Format


TaxGyata Team

TaxGyata Team

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