You do not have to wait for the financial year to end to deposit the tax. Rather, the tax has to be deposited before the end of every quarter. Since income tax has to be filled on earnings, that is why it is known as ‘Pay as you earn’ scheme. If you are not salaried person then you are not liable for TDS but if your annual tax liability is Rs. 10,000 or more then you have to pay advance tax. In such a situation, if income tax liability is more than 10 thousand rupees on your earnings annually, then you have to file it every quarter as Advance Tax.

Advance Tax has to be filled under three situations. 

If you are salaried person but getting higher interest, capital gains, and higher rent.

If you are freelancer and your income tax liability is more than Rs. 10,000.

If you are businessman and your income tax is more than Rs. 10,000.

Note:- If you are a businessman and opts for presumptive scheme where business income is assumed at 8% of turnover of less than 2 crore are exempt from advance tax for FY 2017-2018

Who does not have to pay Advance Tax?

If you are Salaried person and do not have any additional source of income, then you do not have to pay Advance Tax because the TDS that you have deposited is a kind of advance tax. Before the end of every financial year, your Employer deducts Income Tax through TDS on a monthly basis. Your details are available in Form 16.

Those Senior Citizens, whose source of income is not a business, have also been exempted from deposit the Advance Tax from the financial year 2012.

Calculation of Advance Tax

Add Total Earnings

Add the estimated Annual Earnings from all of your Sources. Include Earning from your Salary, Interest Income, Capital Gain, Income from House Property etc. If you are freelancer, then add the estimated earnings from all of your clients.

Reduce the Expenses

If you are a freelancer reduce the expenses to be incurred (estimated) from their earnings. Expenses can be your Office Rent, Internet bill, Mobile bill, Repair of computer or other equipment, your Travel Expenses etc. Your earning can be calculated on the basis of the payment you receive from your clients.

Surcharge, Cess and Rebate Calculation

If your taxable income has the effect of Surcharge, Educational Cess, Rebate etc, adjust them also. Keeping in mind all above conditions calculate the amount of advance tax which you have to deposit.

Due Dates for payment of Advance Tax

For both individual and corporate taxpayers

Due Date Advance Tax Payable
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax
On or before 15th December 75% of advance tax
On or before 15th March 100% of advance tax

  For taxpayers who have opted for Presumptive Taxation Scheme

Due Date Advance Tax Payable
by 31st March 100% of advance tax

Penalty on not depositing the advance Tax in Time

If you do not submit a portion of Advance Tax on due dates according to the schedule given above, then you have to pay Late Fee/penalty. It is charged under two rules.

In case of delay in instalment under Section 234C

If you do not pay advance tax on due date mentioned in the table given above, then the late fees in the next instalment by 1 percent for the previous part will be added.

If full tax has not been deposited for the period under Section 234B

If you do not pay up to 90% of your Advance Tax till the end of the financial year, then the Late fees of 1 percent on the outstanding amount will also be charged.

Self-Assessment Tax

If you have not been able to pay Advance Tax on time then the remaining tax can be deposited by way of self-assessment. Self-Assessment tax is deposited after the end of the financial year. Once the financial year has ended TDS or Advance Tax cannot be deposited for the relevant financial year.

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One Comment

  1. GANDHI MOHAN BHARATI says:

    Good Article. However, it is very difficult to accurately estimate income in a year. Suddenly an increase in income in the last quarter makes one liable to pay interest on advance taxes paid in the earlier quarter. I am unable to find any provision protecting us from such situation

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