Advance Tax Payment
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Updated date : 17 February 2020
There can be nothing better than paying off tax dues in advance than keeping such payments reserved for the end of the financial year. Calculating and paying income tax is always a tedious procedure and it is better to get over with this sooner rather than later.
Advance tax implies the income tax that is paid well in advance, in lieu of lump sum tax payments made at the year end. It also goes by the phrase pay as you earn. The process associated with advance tax payment is not too complicated.
Such payments have to be carried out in the form of instalments, the due dates of which are decided upon by the department of income tax.
What is Advance Tax Payment?
Advance Tax Payment refers to making the payment of a portion of your annual taxes in advance. It is the income tax, which is payable if the tax liability goes beyond Rs. 10, 0000 in a fiscal year. You should pay this tax in the year in which you receive your income. Therefore, it is also called the ‘pay-as-you-earn’ plan.
The applicability of advance tax comes into picture when you have sources of income other than your salary. For example, if you’re earning through interest on investments, capital gains, business, house property, lottery, the theory becomes relevant.
Any due refund brings you an interest of around 0.5 %on a monthly basis, or, 6 % on an annual basis, as in the event of the income tax rebate. Nevertheless, if the advance tax is not paid on time, you’ll be charged 1 % each month, or 12 %every year.
Advance tax is to be paid before the fiscal year ends.
Who should be Paying Advance Tax?
Advance tax is paid by people with tax liabilities of INR 10,000 or more
While advance tax is very commonly paid every year by several people, not all are expected to make such tax payments. Only those who have a tax liability that is more than INR 10,000 in every financial year are expected to make a payment of advance tax. We do everything in our capacity to make our customers understand exactly what their tax liabilities are so that they never have to pay more than the bare minimum needed as advance tax payment.
Advance tax that can be paid by both salaried and business persons
- The payment of advance tax is something that applies to people belonging to every profession and every budget.
- Advance Tax can be paid by businessmen, freelancers as well as salaried persons.
Presumptive Schemes Extended of Late to Salaried Professionals
When should you file Advance Tax?
You can pay the self-assessment taxes or the advance tax on 15th of March, September, and December, in instalments of 40 %, 30 % and 30 %, respectively, for the non-corporates. Corporates have to pat it on 15th of March, June, September, and December.
While the companies deduct the TDS on salaries, you can make advance tax payment on the income, which has not been subjected to the TDS.
How to make advance tax payment?
Advance tax payment on non-TDS deducted income from self-employment, professional service, business, capital gains or any other source, require few simple steps. Individuals can pay advance taxes online or offline through challan 280. Advance tax payment of companies is usually carried out by their accounts section using challan 280. Advance taxes have to be paid by the 15th of each quarter of the financial year. The quarter months of the financial year are June, September, December, and March.
Online advance tax payment
Advance tax payment can be done online through the Income Tax Department portal or through National Securities Depository Limited portal. Taxpayers need to have an account on these portals to pay their taxes through online mode. The account of the taxpayer is linked with PAN. It is now mandatory to also link Aadhaar with PAN. All bank accounts also need to be linked with PAN. Debit or credit data in any bank account of the taxpayer has immediately linked to IT records through PAN.
To pay online advance tax, log on to the IT department portal. Access tax information network and select challan 280. Challan 280 is used for payment of several kinds of taxes. To pay advance tax select ‘100 advance tax’ under the listed items for selection. Fill out all necessary details of PAN Card, address, contact number and other personal details. Enter captcha code to proceed and pay through net banking or debit card secure payment gateways. The portal will generate a receipt of advance tax payment. Take a snapshot of the receipt or save the receipt. The receipt will be required for filing IT returns for the financial year in the assessment year.
Offline advance tax payment
Advance tax payment can also be made at bank branches authorized by the IT department for collecting advance tax payments. The taxpayer can make advance tax payment on challan 280 available at the branches. The taxpayer should carefully fill the relevant sections and check the relevant boxes on the form. Advance tax payment cash or cheque along with form can be submitted at the designated counter. The taxpayer should make sure to get an advance tax payment receipt from the counter. A taxpayer can make an advance tax payment at
- ICICI bank
- Syndicate bank
- State bank of India
- Reserve bank of India
- HDFC bank
- Axis bank
- Punjab national bank
- and other authorized banks
Advance tax payment by self-employed entities
Self earning entities including professionals like doctors, lawyers, architects, and business entities can pay tax as they earn. Self-employed entities can make advance tax payment in three installments before 15th of September, December, and March of FY. Advance tax liability for the period is computed by applying the tax slab rates pro rata. It is best to make advance tax payment on actual income already released and net income projections. Paying advance taxes on income projections may require complicated adjustments and revisions.
For example, if a self earning entity generates a yearly income of Rs. 1 crore then high tax liabilities accrues each quarter. The entity can pay tax on the amount earned in each quarter by the due dates. In this case, business income of Rs 25 lakhs will be subjected to pro rata tax slabs each quarter.
Advance tax amount payment schedules
Self-employed business and professional entities and companies need to clear a minimum percentage of tax liabilities by the due dates.
Self-employed and business entities need to pay up
- At least 30 % of tax liability by September 15 of FY
- At least 60 % of tax liability by December 15 of FY
- 100 % of tax liability by March 15 of FY.
Companies and individuals need to pay up
- At least 15 % of tax liability by June 15 of FY
- At least 45 % of tax liability by September 15 of FY
- At least 75 % of tax liability by December 15 of FY
- 100 % tax liability by March 15 of FY
Deferred advance tax payment
Late payment of advance taxes can attract fines. Missing deadlines or paying less than the mandated amount in any due period implies a levy of 1% Simple Interest (SI) on the remaining tax amount. The interest rate is applied until the remaining tax amount is wholly cleared.
Advance tax payment is made once at FY quarter ending. Deferred or less than mandated tax amount payment attracts 1 % SI on the amount for at least three months. Simple interest at the rate of 1 % on the defaulted amount is levied on the taxpayer for three months if:
- Quarter deadline of advance tax payment is missed
- Tax payment is less than 30 % of the mandated period liability
Excess advance tax payment
If in any certain period taxpayer makes more tax payment than mandated limits then the taxpayer is refunded by the IT department. The IT department refunds the excess amount paid as well as 6% per annum interest for 10 % excess payment over mandated tax liability. The refund is made through online direct transfer in the registered account of the taxpayer.
How can you file Advance Tax?
You can make an advance tax payment with the use of tax payment challan generated at the bank branches chosen by the Income Tax Department. You can deposit this challan with the State Bank of India (SBI), Reserve Bank of India (RBI), HDFC Bank, ICICI Bank, Indian Bank, Indian Overseas Bank, and other authorised banks. There are around 926 branches in the country, which can accept advance tax payments. You could also make the advance tax payment online via the National Securities Depository site or the IT department site.
What if the deadline is missed?
In case, you miss the deadline for the advance tax payment or the amount paid by you is less than the assigned 30 per cent of the overall liability by the 1st deadline, i.e. September 25, you’ll be liable to make payment of interest on the sum that comes to 1 per cent simple interest monthly on the amount defaulted for three months.
What if advance tax payment is made more than required?
If you pay advance tax higher than your total tax liability, you’ll get the excess sum as a refund. The Income Tax Department will pay an interest at 6 per cent per year on the excess amount (only if your amount is more than the 10 per cent of your tax liability).
Advance Tax Calculation & Advance Tax Liabilty calculator:
- We offer our customers with an online advance tax calculator which generates the accurate sum of money that is required to be paid as advance tax.
- In order to use this calculator in the correct fashion clients are expected to enter their name, age, residential status, TDS salary, taxable income and the financial year for which they are making a payment.
- After submitting such details, the online advance tax calculator will produce the sum which will need to be paid as tax for that financial year.
- We make it a point to make our advance tax calculator regularly updated so that it can be used in a smooth and efficient manner by our customers.
- Our online advance income tax calculator is mobile friendly and can be used in both computers and mobile devices in a hassle free fashion.
Advance Tax Exemption
Advance tax payments are exempted for senior citizens and those using presumptive schemes
- People who are above 60 years of age and who rank as senior citizens and who also don’t own business establishments of any kind are those who are always exempted from making advance tax payments.
- Advance tax may also not be paid by tax payers who choose presumptive schemes in which business income is always assumed to be around 8% of the turnover.
- Presumptive schemes are applicable to business persons with more than INR 2 Crore turnover. The presumptive scheme of paying income tax is covered under sections 44AE and 44AD. Such schemes can be easily opted by business people whose annual business turnover is more than 2 cores. While the presumptive scheme for advance tax payments are usually reserved for business people alone, such a scheme has very recently been extended to architects, lawyers and doctors in the financial year 2016 to 2017 provided their yearly receipt totals to a maximum of Rs.50 lakhs.
Refund of Advance Tax
At the end of the financial year, in case the Income Tax Department finds out that you have paid more tax than you should have paid, then the IT department will refund the excess amount paid. By submitting the Form 30 the taxpayers can claim the refund. The taxpayer will have to file claim within a period of 1 year from the last assessment year.
Advance Tax for FY 2019-2020, AY 2020-2021
Let’s take a look at the advance tax schedule for businessman and self-employed.
|Installment Date||Amount Payable|
|On or prior 15th September||Not less than 30% of the advance tax liability|
|On or prior 15th December||Not less than 60% of the advance tax liability|
|On or prior 15th March||100% of tax liability|
Due Dates for the Payment of Advance Tax in the FY 2019 – 2020, AY 2020-2021
|Advance Tax Due Date||Amount Payable as Advance Tax|
|On or prior to 15th of June||15% of the Advance Tax|
|On or prior to 15th of September||45% of the Advance Tax|
|On or prior to 15th December||75% of the Advance Tax|
|On or prior to 15th March||100% of the Advance Tax|
What are the Penalties for those who fail to make Advance Tax Payments?
Payment of Tax with Interest
Not being able to pay advance tax can invite the imposition of penalties from the government. Those who do not pay their advance tax will have to pay an interest under sections 23 4C and 23 4B of the Income Tax Act of 1961.
Penalty Payments made Easier and Quicker
Late advance tax payers can use our services to pay their penalties in an error free way and ensure that there are no more penalties they are likely to be subjected to in the near future. We have experts on our team to calculate such interest penalties very accurately, so that customers are able to dismiss their tax liabilities as early and as efficiently as possible.
What is the Procedure that we follow for paying Advance Tax online?
- We follow a simple and easy procedure to carry out advance tax payments for our clients. The first step that we take in this regard is to find out if the bank with which our customers have online banking facilities is one that is registered for the online payment of income tax.
- If the customer’s bank is not mentioned in the list of banks that do enable income tax payments online, then we cannot carry out such a payment on behalf of our customers.
- The advance tax payment that has to be made does not have to of course necessary made from the bank account of the customer.
- It may also be paid from any account which enjoys the facility of paying income tax online. If the customer’s bank is listed then the next step we take is to log in at tin-nsdl.com.
- The third step involves going to services and selecting e payment as an option and Challan No. ITNS 280 is selected.
- The taxes that are applicable are 0021, that is income tax paid by individuals rather than companies.
- The Assessment Year chosen is the year 2017-2018 while the type of payment chosen is 100 or Advance Tax.
- The PAN number and other personal details of the customer are then entered. The PAN name enters on the screen, this is verified and the details are then submitted once and for all.
- We are then directed to the customer’s bank website. After logging into the account, the amount of tax is inserted in the challan and the payment is made.
- We always make it a point to note down the transaction ID and usually save or print a copy of the challan file that is received.
Can the Payment of Advance Income Tax be avoided?
The payment of advance income tax is something that can most certainly be avoided if the tax payer reports additional income to payroll department at the employer organization. In this case, the additional income will be deducted from the salary of the tax payer by the employer.
The amount that is reported as additional income has to be adjusted by the employer on the TDS that applies for such additional income. For this reason alone, it is very common practice on the part of tax payers to not report any additional income to the employer and to instead opt for the payment of Advance Tax.
The Advance Tax payment services that we provide are designed to ensure that customers have every incentive of making such payments in the first place rather than reporting additional income at the work place or paying penalties upon avoiding advance tax payments.
How to Acquire Assistance for Paying Advance Tax?
Efficient CA Services for the Calculation of Advance Tax
While the payment of Advance Tax may seem like a relatively easy thing to do, it is not actually so. We provide our clients with the best chartered accountant services, using which advance tax payments can be carried out in a smooth and hassle free manner at the end of the financial year or at the start of it. Our chartered accountants are highly qualified professionals who will do everything in their power to make sure that the tax calculations done are those that benefit our customers the most.
Calculations are always 100% Accurate and easily Affordable
The tax calculations that we make are always a hundred percent accurate and are designed to help salaried professionals and business men alike. Our tax calculation services are also very reasonable and can be easily afforded by and every advance tax payer.
Tax Payments made as Flexible as Possible for Customers
We try and make the tax payment structure as flexible as possible for our clients. We ensure they are always in a position to choose dates that are most convenient for them for the payment of advance tax and give them easy payment options like credit and debit card payments or cheque payment options using which tax dues are settled as quickly and as efficiently as possible.
FAQs on Advance Tax Payment
Q.1. When should you make advance tax payment?
Ans. If the tax liability for a year is exceeding Rs. 10,000 after the deduction of TDS, you’ll be liable for the advance tax payment.
Q.2. I’m a senior citizen with a pension and interest income. Can I make advance tax payment?
Ans. If you’re a resident senior citizen and do not have income from any profession or business, then you’re not liable to pay advance tax.
Q.3. Can NRI be liable to pay advance tax?
A3. A Non-resident Indian (NRI) having income accruing in India exceeding Rs. 10,000 is liable for advance tax payment.
Q.4. Do I need to pay any penalty if I don’t make advance tax payment?
Ans. If you don’t pay advance tax, then you might levy interest under section 234C and 234B of the Income Tax Act, 1961.
Q.5. Am I eligible to claim tax deduction under section 80C of the IT Act while calculating income for the determination of the advance tax?
Ans. Yes. You can take all these deductions into consideration while calculation income for the fiscal year for evaluation your liability for advance tax.
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