Advance tax payment under Income Tax and calculation

Summary: Advance tax, governed by Section 208 of the Income Tax Act, is required for taxpayers whose estimated tax liability exceeds INR 10,000 after TDS deductions. It is payable in instalments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15. However, businesses opting for presumptive taxation under sections 44AD and 44ADA need to pay 100% by March 15. Exemptions are provided for those with income below the taxable threshold, senior citizens without business income, and individuals with sufficient TDS deducted. Calculating advance tax involves estimating income, subtracting deductions, and accounting for TDS. Payment can be made online via the Income Tax portal. Failing to meet the advance tax obligations can result in interest penalties under Section 234B and 234C of the Income Tax Act. These penalties are applied if advance tax payments are less than 90% of the total tax due or if instalments are missed. Understanding the due dates and exemptions for advance tax ensures timely compliance and avoids unnecessary interest charges.

Introduction: Section 208 of the Income Tax Act deals with the advance tax provisions. Accordingly, advance tax is payable by every person whose estimated tax liability exceeds INR 10,000 [after deduction of TDS].

Notably, advance tax payment is to be done in instalments as per the due dates prescribed under income tax law.

The current article provides detailed explanation about due dates of advance tax payments; exemptions available on advance tax payments; calculation of advance tax; steps for online payment of advance tax; consequence of delay/ non-payment of advance tax and some relevant Frequently Asked Questions (FAQs).

Due dates of advance tax payments under Income Tax

Advance tax payment instalments and due dates thereof in case of individuals and corporate taxpayers are tabulated hereunder –

Advance Tax Payment Instalments and Due Dates for Presumptive Taxation Opted Taxpayers

Advance tax payment instalments and due dates thereof in case of taxpayers who has opted for presumptive taxation scheme under section 44AD and 44ADA (Business Income) are tabulated hereunder –

Exemptions available on advance tax payments –

Following exemptions are available on advance tax payments –

• Taxpayers having income less than basic exemption limit;
• Taxpayers having income exceeding basic exemption limit, however, appropriate TDS is deducted on the income and total tax liability doesn’t exceed INR 10,000;
• Taxpayers having age of 60 years or more (i.e. senior citizens) who are not having income from business or profession.

Calculation of advance tax under Income Tax

Advance tax amount can be calculated by following the below steps –

STEP 1 – Estimate total income earned in the respective period/ year under all the heads of income;

STEP 2 – Reduce allowable deductions i.e. u/s. 80C, 80D, etc. from estimated total income;

STEP 3 – Calculate tax payable as per the applicable tax slab;

STEP 4 – Reduce tax deducted at source from tax payable. Now, the amount arrived at will be the advance tax amount payable in the respective period/ year.

Steps for online payment of advance tax under Income Tax

STEP 1 – Visit income tax portal i.e. https://www.incometax.gov.in/iec/foportal/;

STEP 2 – Click Login and provide appropriate login credentials:

STEP 3 – Navigate e-File > E-Pay Tax;

STEP 4 – Click ‘+ New Payment’ icon;

STEP 5 – Click ‘Proceed’ under Income Tax section;

STEP 6 – Select ‘Assessment Year’ and ‘Type of Payment (Minor Head)’ from the drop-down arrow;

STEP 7 – Click ‘Continue’;

STEP 8 – Enter tax break up details i.e. amount of tax, surcharge, cess, interest, penalty and others;

STEP 9 – Click ‘Continue’ and make payment by selecting the appropriate payment mode.

Notably, advance tax payment can also be made without login into income tax portal by following the below steps –

STEP 1 – Visit income tax portal i.e. https://www.incometax.gov.in/iec/foportal/;

STEP 2 – Click ‘e-Pay Tax’ under ‘Quick Links’;

STEP 3 – Enter PAN and re-enter PAN for confirming it. Further, enter mobile number and click ‘Continue’;

STEP 4 – Enter OTP received on the mobile number and click ‘Continue’;

STEP 5 – Select ‘Income Tax’ and click ‘Proceed’;

STEP 6 – Select ‘Assessment Year’ and ‘Type of Payment (Minor Head)’ from the drop-down arrow;

STEP 7 – Click ‘Continue’;

STEP 8 – Enter tax break up details i.e. amount of tax, surcharge, cess, interest, penalty and others;

STEP 9 – Click ‘Continue’ and make payment by selecting the appropriate payment mode.

Consequences of delay/ non-payment of advance tax –

Interest under section 234B and/ or section 234C of the Income Tax Act will be levied in case of delay/ non-payment of advance tax. The same is explained hereunder –

• Interest under section 234B of the Income Tax Act –

Interest u/s. 234B is levied when the taxpayer fails to pay the requisite advance tax amount i.e. when advance tax payment is less than 90% of the assessed tax liability. Interest @1% per month is levied.

• Interest under section 234C of the Income Tax Act –

Interest u/s. 234C is levied when the taxpayer defaults in paying the advance tax instalments. Interest charged u/s. 234C is explained hereunder –

Frequently Asked Questions (FAQs) related to Advance tax payment under Income Tax

1. What is the slab for advance tax?

Advance tax is payable in four instalments in the following slabs –

2. What is meant by advance tax?

Advance tax is the amount of tax that is payable much in advance, instead of lump-sum payment at the end of the financial year, as per the due dates prescribed under income tax law.

3. Who should pay advance taxes?

Advance tax is payable by every person whose estimated tax liability is more than INR 10,000 [after deduction of TDS].

4. Do salaried employees need to pay advance tax?

Yes, salaried employees are also liable to pay advance tax in case their estimated tax liability (after deduction of TDS) exceeds INR 10,000.

5. What if I don’t pay advance tax?

Interest under section 234B and section 234C of the Income Tax Act will be levied in case of failure in payment of advance tax.