Taxation

What is Advance Tax and Who is Liable to Pay Advance Tax ?

What is Advance Tax, and Who is Liable to Pay Advance Tax?

Advance tax is also known as pay tax as you earn. It should be paid in advance during the financial year instead of a lump sum payment after the end of the year. If your estimated total tax liability [after TDS] is Rs 10,000 or more in a financial year, you need to pay advance tax.

These payments have to be made in instalments as per due dates provided by the income tax department.

The advance tax applies to all taxpayers irrespective of the profession, whether you are salaried, freelancer, or businessmen. However, Senior citizens, who are 60 years or more, and do not run a business, are exempt from paying advance tax.

Taxpayers are required to pay advance tax on their income which they expect to earn during the current year. For example, for the financial year 2021-22/the assessment year, 2022-23 advance tax is payable in instalments during 2021-22 itself. The advance tax so paid is adjusted against the total tax assessed for that assessment year, i.e. A.Y.2022-23.

Who is Liable to Pay Advance Tax?

The following persons are liable/responsible to pay advance dates before their due dates.

  1. All persons, including individuals, salaried persons whose tax during the financial year is more than Rs.10,000/- are liable to pay advance tax before due dates.
  2. Normally, in the case of salaried people, TDS has to be deducted by the employer on the salary earned during the financial year. However, if the employer goes wrong to do so or deduct less TDS, then salaried persons are also required to pay advance tax however, if the income tax is less than Rs.10,000 after TDS, subsequently no advance tax payment is required.
  3. Other persons that received an order u/s 210(3) are also required to pay advance tax as mentioned in that order. The instalments will furthermore be specified in the order. That person has also the option to pay higher advance tax if the estimated income is higher than the order. However, if the estimated income is lesser than the income specified in the order, then he must give the reply in form 28-A to deposit advance tax next instalment on lower-income.
  4. All Individual, HUF, Firms, LLP, Company, AOP, BOI. Non-residents are also required to deposit advance tax.

Difference Between Advance Tax and Self Assessment Tax 

Any tax paid before completion of a financial year is Advance Tax. While tax paid after completion of the financial year by assessee without receipt of any demand notice is called self-assessment tax. Code for payment of advance tax is “100” while for self-assessment tax it is “300”. If the tax is paid after assessment on notice of demand then tax is to be paid as Tax on regular assessment under tax code “400”.

Income Tax Act

Following are the sections of the Income Tax Act, 1961 which deal with the provisions of advance tax:

  • Section 208: Conditions of liability to pay advance tax
  • Section 209: Computation of advance tax
  • Section 210: Payment of advance tax by the assessee of his own accord or in pursuance of an order of Assessing Officer.
  • Section 211: Instalments of advance tax and due dates.

Who is Not Liable to Pay Advance Tax?

Senior citizens (over 60 years during the previous year) not having any income from business or profession shall not be liable to pay any advance tax.

Hope you liked our article; we will cover other topics of advance in our next articles like how to deposit advance tax, penal interest on short payment of advance tax and examples related to it.

 


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Hello, I am C.K. Gupta owner 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.

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