You have a Date with the Tax Department (Advance Tax Installments due on or before 15th June, 15th September, 15th December and 15th March)
Every tax payer in India having net tax liability of more then Rs.10,000/- in a year after considering TDS is required to pay Advance Tax in four installments i.e on or before 15th June, 15th Sept, 15th Dec and 15th March. Non-payment of Advance Tax or Short Payment of Advance Tax during a Financial Year attracts Interest payment on the amount of short fall @ 1% per month u/s.234B and 234C of the Income Tax Act, 1961. Senior Citizens (60 years or more) who are Resident of India and not having any Business Income are exempted from the payment of Advance Tax.
How to work out Advance Tax:
One is required to estimate his tax liability towards beginning of the financial year, deduct expected amount of TDS on various Income therefrom and if the net amount is more then Rs.10,000/-, the same is required to paid in four installments, as shown in the following table:
| Installment | % of Advance Tax to be paid | On or before (i.e the due date) |
| I | 15% | 15th June |
| II | 45% | 15th Sept |
| III | 75% | 15th Dec |
| IV | 100% | 15th March |
Interest U/s.234C
At the end of the year, when the actual tax liability is worked out (net of TDS) if there is any shortfall in the payment of any of these installments, one is required to pay Interest @ 1% per month for the applicable quarter u/s.234C. However, in case of Capital Gains and Dividend Income, no Interest u/s.234C shall be payable, provided that entire tax due on such Income has been paid on or before the next installment of Advance Tax, after accrual of such Income or on or before 31st March, when no more installments are due.
Interest U/s.234B
At the end of the year, if total Advance Tax paid turns out to be less then 90% of the Actual Tax Liability (net of TDS), Interest @ 1% per month is payable u/s.234B, till the date of payment of the amount of shortall in Advance Tax.
It’s a fact that nobody likes to pay taxes, and here we are discussing paying the taxes in Advance. However; there are in fact some inherent benefits of paying Advance Tax as indicated below.
Advantages of Paying Advance Tax:
1.Avoid Penalties and Interest:
Paying Advance Tax ensures that you don’t incur interest or penalties under sections like 234B and 234C for underpayment or late payment of Advance Taxe.
2. Smooth Cash Flow Management:
Paying in installments; helps to spread out the tax burden to different quarters of the year. Paying entire amount of tax at one go towards the end of the year, can be financially stressful and burdensome.
3. Ease of Budgeting:
Advance tax payment allows you to plan and budget for your taxes effectively, without the pressure of a large, one-time payment.
4. Improved Creditworthiness:
If you are into business, paying Advance Tax regularly reflects credibility and financial discipline, which can help improve your creditworthiness and ensure smooth operations.
5. Interest on Refunds:
If you end up paying more tax as Advance Tax than what you actually owe, you will be eligible to get Interest on Refund of the Excess Advance Tax deposited.
6. Satisfy Tax Compliance:
Regular Advance Tax payments keep you compliant with the Tax Laws and lessens the risk of tax evasion charges.
By paying advance tax, you can better manage your finances and can buy peace by staying on the right side of the Law.
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