Advance income tax, also known as ‘pay as you earn’, is when you pay your tax liabilities in the same year. However, you don’t pay in lump sum but rather in instalments. You can easily pay the tax online through the official website of the Income Tax Department.
Additionally, there are certain terms and conditions on who is liable to pay advance tax and how it is calculated. Read on to learn more.
Who Should Pay Advance Tax
You must pay advance income tax in case you fall under any of the following:
- Salaried Individual, Freelancer or Business Owner: You need to pay advance tax if you fall under these categories, and your total tax liability for the year amounts to ₹10,000 or more.
- Senior Citizens: You enjoy an exemption in case you are a senior citizen above the age of 60 and are not engaged in business. However, if you earn an income from a business, you need to pay the tax.
- Presumptive Income for Business: If you opt for the presumptive taxation scheme under Section 44AD, you are liable to pay the tax in advance.
- Presumptive Income for Professionals: If you are an independent professional like a doctor, lawyer or architect, you fall under the presumptive scheme u/s 44ADA, and need to pay advance tax.
Dates for Payment of Advance Tax
Being aware of the due dates is essential to steer clear of late payment penalties and other consequences. Refer to the following table for the due dates for FY 2024-25:
| Due Date | Advance Tax Payment Percentage |
|---|---|
| On or before 15th June | 15% of advance tax |
| On or before 15th September | 45% of advance tax (-) advance tax already paid |
| On or before 15th December | 75% of advance tax (-) advance tax already paid |
| On or before 15th March | 100% of advance tax (-) advance tax already paid |
| On or before 15th March | 100% of advance tax (Presumptive Taxation Scheme u/s 44AD and 44ADA – business and professional income) |
Also Read: What Is Self-Assessment Tax?
Calculation of Advance Tax
If you are wondering how advance tax is calculated, follow these simple steps to compute the tax outgo:
- Step 1: Start by calculating your annual earnings for the year, with sources such as:
- Capital gains
- Interest income
- Rental income
- Professional income
- Step 2: Calculate your gross taxable income for the year by adding your salary
- Step 3: From the gross receipts, reduce various deductions that apply based on the regime you choose
- Step 4: Determine the amount of tax payable based on the current applicable income tax rates
- Step 5: Subtract any Tax Deducted at Source (TDS) already deducted or expected to be deducted based on the applicable tax rates
- Step 6: If your tax liability after deducting TDS exceeds ₹10,000, it will be your advance tax amount and you must follow the guidelines to pay it
Also Read: Calculation Of Tax
Process to Pay Advance Tax Online
Follow these simple steps to make the payment after advance tax computation:
- Step 1: Go to the e-filing portal of the Income Tax Department
- Step 2: Navigate to the ‘Quick Links’ section and click on ‘e-Pay Tax’
- Step 3: Provide your PAN, re-enter for verification, enter your contact number, and click ‘Continue’
- Step 4: Type in the 6-digit OTP received on your number and click on ‘Continue’
- Step 5: Select the ‘Income Tax’ box and click on ‘Proceed’
- Step 6: Choose the ‘Assessment Year’ as 2025-26 and then select ‘Type of Payment’ as ‘Advance Tax (100)’ and click on ‘Continue’
- Step 7: Enter all your tax details
- Step 8: Choose the payment mode and the bank and click ‘Continue’
- Step 9: Check the challan details and click on ‘Pay Now’
- Step 10: You will get an acknowledgement on the screen after the payment
Also Read: Taxable Income Slabs for FY 2024-25
Late Payment Interest on Advance Tax
Here is the interest calculation on advance tax in case of delayed or no payments:
- Non-payment Attracts Interest Under 234B
As per Section 234B, you need to pay a minimum of 90% of the total tax obligation as advance tax or TDS/TCS by 31st March. If you fail to pay the tax, an interest of 1% will apply on the unpaid amount.
- Delayed Payment Attracts Interest Under 234C
| Particulars | Rate of Interest | Period of Interest | Amount on which interest is calculated |
|---|---|---|---|
| If Advance Tax paid by 15th June is less than 15% | 1% per month | 3 months | 15% of Amount* (-) tax paid before June 15 |
| If Advance Tax paid by 15th September is less than 45% | 1% per month | 3 months | 45% of Amount* (-) tax paid before September 15 |
| If Advance Tax paid by 15th December is less than 75% | 1% per month | 3 months | 75% of Amount* (-) tax paid before December 15 |
| If Advance Tax paid by 15th March is less than 100% | 1% per month | 1 month | 100% of Amount* (-) tax paid before March 15 |
With this information in hand, you can easily pay your taxes on time and avoid the penalties associated with late payments. In case you need financial assistance for any planned or unforeseen expenses, consider getting an Instant Cashl Loan from Fibe. Get the required funding at pocket-friendly interest rates and minimal formalities.
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FAQs on Advance Tax
How is interest calculated on advance tax?
The interest rate of advance tax is applicable at 1% per month in case of delayed or no payments. The amount on which interest is calculated depends on the dues.
What is meant by advance tax?
It is when you clear your tax liabilities during the year in which you incur it. You pay it only if your estimated tax is more than ₹10,000.
How to calculate 234B and 234C interest?
The interest rate for both is 1% per month but 234B is applicable when you don’t pay the advance tax even after the financial year ends. 234C is applicable when you don’t pay the advance tax on time during the financial year.
What is the advance tax calculation period?
The advance tax computation period is the financial year for which you will file the return.
