How to Calculate Advance Tax , Online Payments & Due Dates for FY 2024-25
Advance Tax, often referred to as “pay-as-you-earn” tax, is a system where taxpayers make prepayments of their income tax throughout the financial year instead of paying a lump sum at year-end. This system is designed to ensure a steady flow of revenue for the government and to help taxpayers manage their tax obligations effectively.
In India, advance tax is applicable to individuals, businesses, and other entities whose estimated tax liability for the year exceeds Rs. 10,000. This guide will provide a complete overview of Advance Tax payment and calculation for the financial year (FY) 2024-25.
Also Read-How to File Income Tax Returns (ITR) Online in India?
Who Needs to Pay Advance Tax?
Advance tax is applicable to various categories of taxpayers, including:
- Salaried Individuals: If the total tax liability after considering Tax Deducted at Source (TDS) exceeds Rs. 10,000.
- Freelancers and Professionals: Individuals earning income from freelancing or professional services.
- Businesses: Both corporate and non-corporate entities.
- Senior Citizens: Individuals aged 60 years or more who do not have income from business or profession are exempt from paying advance tax.
Due Dates for Advance Tax Payment.
The due dates for advance tax payments are standardized for both individual and corporate taxpayers. The payments are to be made in four installments throughout the financial year:
| Due Date | Amount of Advance Tax Payable |
|---|---|
| On or before June 15 | Up to 15% of advance tax liability |
| On or before September 15 | 45% of advance tax less advance tax already paid |
| On or before December 15 | 75% of advance tax less advance tax already paid |
| On or before March 15 | 100% of advance tax less advance tax already paid |
For individuals who have opted for the presumptive taxation scheme under sections 44AD/44ADA, the entire advance tax liability must be paid in one installment on or before March 15.
How to Calculate Advance Tax.
Calculating advance tax involves estimating your total income for the financial year and then applying the applicable tax rates. Here are the steps to calculate advance tax:
- Estimate Total Income: Calculate your total income from all sources, including salary, business income, interest, rent, capital gains, etc., for the period from April 1 to March 31 of the financial year.
- Subtract Deductions and Exemptions: Deduct eligible expenses, investments, and other exemptions as per the Income Tax Act.
- Compute Tax Liability: Apply the applicable tax rates to the net income to compute the total tax liability.
- Reduce TDS/TCS: Subtract the amount of tax already deducted at source (TDS) or collected at source (TCS).
- Determine Advance Tax Liability: If the resulting amount exceeds Rs. 10,000, you need to pay advance tax.
Example of Advance Tax Calculation.
Let’s consider an example to understand the calculation of advance tax:
Example:
Mr. Shah estimates his income for the financial year 2024-25 as follows:
- Business Income: Rs. 5,95,000
- Income from House Property: Rs. 23,000
- Interest on Deposit (TDS Rs. 1,200): Rs. 12,000
- Dividend Income: Rs. 10,000
Step-by-Step Calculation of Advance Tax:
- Total Income: Rs. 5,95,000 (Business) + Rs. 23,000 (House Property) + Rs. 12,000 (Interest) + Rs. 10,000 (Dividend) = Rs. 6,40,000
- Deductions: Assume Mr. Shah has invested Rs. 50,000 in ELSS (Equity Linked Saving Scheme) and paid Rs. 20,000 towards LIC premium.
- Net Taxable Income: Rs. 6,40,000 – Rs. 70,000 (Deductions) = Rs. 5,70,000
- Tax Liability: Apply the applicable tax rates to Rs. 5,70,000. Assuming the old tax regime:
- Up to Rs. 2,50,000: NIL
- Rs. 2,50,001 to Rs. 5,00,000: 5% of Rs. 2,50,000 = Rs. 12,500
- Rs. 5,00,001 to Rs. 5,70,000: 20% of Rs. 70,000 = Rs. 14,000
- Total Tax: Rs. 12,500 + Rs. 14,000 = Rs. 26,500
- Less TDS: Rs. 26,500 – Rs. 1,200 (TDS on Interest) = Rs. 25,300
- Advance Tax Liability: Rs. 25,300
Installment Payments of Advance Tax:
| Due Date | Advance Tax Liability Percentage | Advance Tax Payable (Rs.) | Amount Already Paid (Rs.) | Balance to be Paid (Rs.) |
|---|---|---|---|---|
| 15th June | 15% | 25,300 x 15% = 3,795 | Nil | 3,795 |
| 15th September | 45% | 25,300 x 45% = 11,385 | 3,795 | 7,590 |
| 15th December | 75% | 25,300 x 75% = 18,975 | 11,385 | 7,590 |
| 15th March | 100% | 25,300 x 100% = 25,300 | 18,975 | 6,325 |
Penalties for Non-Payment or Late Payment of Advance Tax.
Failure to pay advance tax or paying it late can attract interest under sections 234B and 234C of the Income Tax Act.
- Section 234B: If you fail to pay at least 90% of your total tax liability by March 31, you will be charged an interest of 1% per month on the unpaid amount.
- Section 234C: If you delay the payment of advance tax installments, you will be charged an interest of 1% per month for the period of delay.
Benefits of Paying Advance Tax.
Paying advance tax has several benefits:
- Reduces Financial Burden: Spreads the tax liability over the year, reducing the financial burden at the end of the financial year.
- Avoids Penalties: Timely payment of advance tax helps avoid interest and penalties.
- Improves Cash Flow Management: Helps in better financial planning and cash flow management.
- Ensures Compliance: Ensures compliance with tax regulations and avoids legal consequences.
How to Pay Advance Tax Online.
Paying advance tax online is a convenient and straightforward process. Here are the steps to make an online payment:
- Visit the Income Tax e-Filing Portal: Go to the official Income Tax Department website.
- Select ‘e-Pay Tax’: Under the ‘Quick Links’ section, select ‘e-Pay Tax’.
- Fill in the Details: Enter your PAN, assessment year, type of payment (Advance Tax), and other required details.
- Choose Payment Mode: Select the payment mode (net banking, debit card, etc.) and complete the payment.
- Generate Challan: After successful payment, a Challan Identification Number (CIN) will be generated. Save this for future reference.
Wrapping up.
Advance tax is an essential aspect of tax compliance in India. It helps in the timely collection of taxes and ensures a steady revenue flow for the government. By understanding the due dates, calculation methods, and penalties associated with advance tax, taxpayers can manage their tax liabilities effectively and avoid last-minute financial stress. Paying advance tax not only ensures compliance with tax laws but also provides peace of mind and better financial planning.
FAQs Relate to Advance Tax.
Q1. What is advance tax?
Advance tax is the prepayment of income tax by taxpayers throughout the financial year based on their estimated income. It is also known as “pay-as-you-earn” tax.
Q2. Who needs to pay advance tax?
Individuals, businesses, and other entities with an estimated tax liability exceeding Rs. 10,000 in a financial year need to pay advance tax. Senior citizens without business income are exempt.
Q3. What are the due dates for advance tax payment?
The due dates for advance tax payments are June 15, September 15, December 15, and March 15.
Q4. How is advance tax calculated?
Advance tax is calculated by estimating the total income for the financial year, subtracting eligible deductions, computing the tax liability, and reducing the amount of TDS/TCS already paid.
Q5. What happens if I don’t pay advance tax on time?
Failure to pay advance tax on time can result in interest charges under sections 234B and 234C of the Income Tax Act.
Q6. How can I pay advance tax online?
Advance tax can be paid online through the Income Tax Department’s e-filing portal using net banking, debit card, or other payment modes.
Q7. Are there any benefits of paying advance tax?
Yes, paying advance tax reduces the financial burden at the end of the financial year, avoids penalties, improves cash flow management, and ensures compliance with tax regulations.
Q8. Can advance tax payments be revised?
Yes, advance tax payments can be revised if there are changes in the estimated income during the financial year.
Q9. What if I overpay advance tax?
If you overpay advance tax, the excess amount will be refunded by the Income Tax Department after filing your income tax return.
Q10. Do senior citizens need to pay advance tax?
Senior citizens aged 60 years or more who do not have income from business or profession are exempt from paying advance tax.
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C.K. Gupta
Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.
