Advance Tax
Introduction to tax - Tax constitutes a major form of revenue for most of the Governments across the world. Taxes are levied and spent by the government for the development of the country like infrastructure, healthcare, defense etc. Taxes can be categorized into two broad categories namely direct tax and indirect tax. A tax paid directly by the person on whom it is levied is known as direct tax. Taxes where the person paying and the person whom it is levied upon are two different people are an indirect tax. Example of direct tax is income tax and an example of indirect tax is sales tax.
Advance tax - Payment of tax liability by a person before the end of financial year is called Advance tax. This is applicable only in case of Income tax of an individual or a business entity. A simple question arises as why somebody would like to pay taxes in advance.
Are you liable to pay advance tax?
Advance tax is payable only when an assessee’s total tax liability is exceeding Rs 10,000.
Advance tax –Rates and Dates
For non corporate assessee installments of advance tax is to be paid as per the below
- 30% of tax payable should be paid as advance tax on or before 15th September
- 60% of tax payable should be paid as advance tax on or before 15th December
- 100% of tax payable should be paid as advance tax on or before 15th January
- There are 4 installments of advance tax for corporate assessee.
- 15% of tax payable should be paid as advance tax on or before 15th June
- 45% of tax payable should be paid as advance tax on or before 15th September
- 75% of tax payable should be paid as advance tax on or before 15th December
- 100% of tax payable should be paid as advance tax on or before 15th March
Consequences of nonpayment of advance tax –
If the amount of advance tax paid is less you will have to pay penalty interest as per the below
For Non Corporate assessee –
- If advance tax paid in the first two installments is less than specified, simple interest @ 1% per month is charged on the deficit amount for a period of 3 months.
- If the aggregate of advance tax paid is less than 90% of tax payable on 15th March penalty of simple interest @ 1% per month is charged on the amount shortfall until the tax is paid
For Corporate assessee –
Simple interest @ of 1% is charged on the deficit amount for a term of 3 months if you have failed to pay advance tax or if advance tax paid is less than tax due as per the above slab. For the 4th and final installment if the advance tax paid is less than 90% of tax payable simple interest @ 1% per month is charged on the deficit from 1st April until the tax is fully paid.
How to pay advance tax?
Advance tax can be paid online through the website of income tax department. It can also be paid by filling challan, ITNS 280 and submitting it at designated branches of specified banks. SBI, Corporation bank and ICICI are some of the banks that accept advance tax payments.
What if Advance tax paid is more than required?
If the amount paid as advance tax is higher than the total tax liability, the assessee will receive the excess amount as a refund. Interest @6% p.a will be paid by the income tax department to the assessee on the excess amount if the excess amount is more than 10% of tax liability.
Contributed By: Aruna Sharma |
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Mrs. Sharma holds a Masters in Financial Management from University of Mumbai. She has graduated from the University of Mumbai. | |
I think it should be 1st March.
While calculating advance tax is the education cess also to be paid,otherwise we can add while we file the returns.
VISHWA NATH MISRA