Know if you are liable to pay Advance Tax

Last Updated On: March 13, 2021, 9:42 p.m.
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KNOW IF YOU ARE LIABLE TO PAY ADVANCE TAX

Every individual has certain responsibilities under different laws and when it comes to the Income Tax Act. One of the primary responsibilities is to pay the required tax on the income earned during the year. There are various ways in which the tax will be paid and this covers self-assessment tax, tax deducted at source, advance tax and tax on assessment. Advance tax is the tax that is paid in advance for the income of a particular financial year. The normal expectation is that tax has to be paid only when the income is earned but under the tax provisions the tax payer has to actually estimate the income for the entire year and based on this pay advance tax at specific time intervals.

 

When shall a person be liable to pay advance tax?

  • A Person Shall be liable to pay advance tax only if Tax Liability exceeds Rs. 10,000 i.e., a person shall be exempt from payment of Advance Tax If Tax Liability does not exceed Rs. 10,000.
  • The Education Cess and Secondary Higher Education cess shall also be considered for the purpose of calculating the Tax Liability.
  • A Senior Citizen who does not have Income under head Business or Profession shall be exempt from the Payment of Advance Tax.
  • Taxpayers opting for the presumptive taxation scheme of section 44AD are also liable to pay advance tax in respect of business covered under section 44AD.

 

What are the due dates of payment of advance tax?

Due Date

Advance Tax Payable

On or before 15th June 15% of advance tax

On or before 15th September

45% of advance tax less advance tax already
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

 

 

Therefore, by 15th March, 2021, taxpayers are liable to pay minimum 100% of advance tax in a single installment.

 

Interest on default in paying advance tax

Interest under section 234B is applicable when:

Tax liability after reducing TDS for the financial year is more than Rs 10,000 and one does not pay any advance tax.

or

One has paid advance tax, but advance tax paid is less than 90% of ‘assessed tax’.

In any one of the above cases, interest under section 234B shall be applicable. Interest is calculated @ 1% on Assessed Tax less Advance Tax. Part of a month is rounded off to a full month. The amount on which interest is calculated is also rounded off in such a way that any fraction of a hundred is ignored.

Interest under section 234C is applicable when:

The interest for late payment is set at 1% on the amount of tax due. It is calculated from the individual cut off dates, till the date of actual payment of outstanding taxes. Computation of interest under Section 234C is as follows:

 

Rate of Interest

Period of Interest

If Advance Tax paid on or before June 15 is less than 15% of the Amount

Simple interest @1% per month 3 months

If Advance Tax paid on or before September 15 is less than 45% of the Amount

Simple interest @1% per month 3 months
If Advance Tax paid on or before December 15 is less than 75% of the Amount Simple interest @1% per month 3 months
If Advance Tax paid on or before March 15 is less than 100% of the Amount Simple interest @1% per month  

 

How can advance tax be paid?

Advance tax can be paid online as well as offline.

To Pay online:

Step 1 – Login to the income tax website www.incometaxindia.com

Step 2 – Click on e-payment of Taxes tab

Step 3 – Now under the Service tab, select e-payment option

Step 4 – To pay advance tax, select Challan 280

Step 5 – Fill in the required details

Step 6 – Choose Net banking option to pay online

Step 7 – After successful payment, a challan certificate will be displayed which will contain the information number, payment details and bank name via which e-payment was made. This certificate is proof of the payment that has been done

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