Advance Tax

Wondering what is advance tax?

Before you get to the advance tax meaning, keep in mind that the Income Tax Department allows eligible individuals to pay tax in advance as per certain due dates. Generally, there are four dates during which you can pay advance tax. So, advance tax refers to the amount you pay in instalments well before the tax is due instead of a single, one-time payment at the end of the year. 

The advance tax system provides many benefits, like reducing the burden of paying a large sum at once. It also reduces the chances of you failing to make tax payments, protecting you from any late payment penalties. If your advance tax payment exceeds your actual tax liability, then you will be eligible for an income tax refund. 

Consider this advance tax example: Say you have a net taxable income of ₹10 lakhs and the taxes that you need to pay amount to ₹1,12,500. Here, you will make an advance tax payment as per the percentage mentioned based on when you pay the tax. You can use an advance tax calculator via major financial institutions to compute this amount.

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