Who Ought to Pay & How A lot

To run the nation easily, the federal government wants a gradual movement of income all year long. Since earnings tax is a significant supply of this income, counting on tax funds on the finish of the monetary 12 months can create gaps and issues for them. To handle this, the federal government launched the advance tax fee system to make sure that people and companies pay taxes as they earn. 

Based on this technique, these with tax legal responsibility above a sure threshold should pay advance tax in installments over the 12 months. This additionally helps taxpayers distribute a big burden on the finish of the 12 months as they will pay taxes in smaller, manageable quantities over time, identical to an EMI.

Understanding Advance Tax Funds

So, what’s advance tax? Merely put, it’s the tax you pay earlier than the monetary 12 months ends, as a substitute of ready till the tip of the 12 months to clear all of your dues. Additionally it is generally known as the ‘pay-as-you-earn’ scheme since you pay taxes in installments primarily based in your estimated earnings all year long. 

In case your whole tax legal responsibility exceeds Rs. 10,000 in a monetary 12 months (after adjusting for TDS), you might be required to pay advance tax in 4 installments, on or earlier than fifteenth June, fifteenth September, fifteenth December, and fifteenth March. Since taxpayers might be penalised for inaccurate funds or delays, many individuals want reaching out to a monetary marketing consultant for stress-free submitting.

Who Must Pay Advance Tax?

Any enterprise or particular person whose estimated tax legal responsibility in a given monetary 12 months exceeds Rs. 10,000 should pay advance tax. This consists of:

1. Salaried people with earnings past wage

In case your main supply of earnings is wage, your employer already deducts TDS on the acceptable slab charges, which suggests you don’t want to make an advance earnings tax fee on wage. You could discover that this TDS provision does the precise factor as advance tax – it maintains a steady movement of tax income for the federal government. 

Nonetheless, in case you have different sources of earnings, comparable to from lease, capital features, curiosity from FDs, dividends, and lottery winnings, and the TDS deducted doesn’t cowl your whole tax legal responsibility, you could pay advance tax.

2. Freelancers and self-employed professionals

People incomes an expert earnings comparable to consultants, attorneys, medical doctors, and writers, should estimate their annual earnings and pay advance tax in 4 installments. Because the acceptable TDS will not be deducted from such earnings, you might be answerable for fulfilling your tax obligations. For instance, your employer could solely deduct a ten% TDS in your freelance earnings. Nonetheless, in case you fall underneath the 20% tax slab, you’ll nonetheless have to pay the remaining 10% as advance tax to keep away from curiosity or penalties. Speaking to a tax saving marketing consultant in such circumstances might be fairly useful.

Beneath Part 44ADA, professionals can go for the presumptive taxation scheme and pay their advance tax legal responsibility in a single installment earlier than thirty first March.

3. Companies

All companies are required to pay advance tax in 4 installments if their anticipated tax legal responsibility crosses Rs. 10,000 in a monetary 12 months. These choosing the presumptive taxation scheme underneath Part 44AD pays their complete advance tax in a single installment by thirty first March as a substitute of 4.

4. Non-residents

If you’re an NRI and earn an earnings from any taxable Indian sources like lease, FD curiosity, or capital features exceeding Rs. 10,000 after TDS in a monetary 12 months, you could pay advance tax earlier than the advance tax due dates.

5. Exemptions

• Senior residents who don’t earn earnings from a enterprise or occupation are exempt from paying advance tax, even when their whole taxable earnings exceeds Rs. 10,000.
• If employers deduct enough TDS out of your wage and canopy your whole tax legal responsibility, you don’t want to pay advance tax individually.
• If the TDS deducted by banks, employers, mutual fund homes, and tenants from varied sources of earnings (wage, rental, fastened deposits, curiosity, and so on.) is enough to cowl your whole tax legal responsibility, you needn’t make an earnings tax advance tax fee.

Advance Tax Fee Dates and Due Dates 

Given under are the advance tax fee dates established by the federal government. Lacking them can lead to penalties underneath Sections 234B and 234C of the Earnings Tax Act.

People and corporations who’ve opted for the presumptive taxation scheme can merely make their advance tax funds in a single installment by thirty first March. For the remainder, the federal government has set clear advance tax due dates, not like TDS fee final date, which is usually the seventh of the next month.

Advance Tax Fee On-line

Funds might be made bodily at designated financial institution branches, however it’s also possible to conveniently make earnings tax advance tax funds on-line by way of the IT Division’s tax portal, by way of web banking, debit playing cards, and even UPI. In the event you’re questioning methods to pay advance tax on-line, you’ll find the step-by-step walkthrough close to the tip of this text!

The right way to Calculate Advance Tax

Calculating precisely how a lot advance tax is owed might be difficult because it requires you to make an affordable estimate of your earnings and tax legal responsibility for the 12 months. One could marvel methods to pay advance tax so early in June when the complete 12 months’s earnings is unsure. Fortunately, since there are 4 installments, you may make changes within the later quarters primarily based in your precise earnings. 

In case your earnings will increase, you may pay the additional tax within the subsequent installment to keep away from penalties. However, in case your earnings are decrease than what you initially anticipated, your remaining funds might be decreased accordingly.

Right here’s how one can calculate advance tax:

1. Estimate how a lot you’ll earn within the monetary 12 months

To make an correct estimate of your tax legal responsibility, you might want to consider each supply of your earnings. This consists of wage, enterprise earnings, curiosity, dividends, rental earnings, skilled earnings, capital features from investments, and another taxable earnings.

2. Outdated regime issues

In the event you plan on submitting your taxes underneath the outdated tax regime, subtract any deductions you might be eligible for. Some examples are

• Part 80C deductions as much as Rs. 1.5 lakh per 12 months for investing in ULIPs, ELSS, PPF, SCSS, and extra.
• Part 80D deductions for funds in the direction of medical insurance premiums for your self and your family members.
• Part 80E deductions on curiosity funds for training loans.
• Part 24(b) deductions on curiosity paid on residence loans.

Subtracting these deductions and exemptions ought to provide the gross taxable earnings on which you’ll calculate your tax legal responsibility for the 12 months.

3. Decide tax owed primarily based on earnings tax slabs

Use an earnings or advance tax calculator with the newest slab charges to get a dependable estimate of tax owed. These calculators additionally account for cess and surcharge which might be simply missed when calculating manually. A wealth planner will help you with this step and likewise information you to optimize your tax legal responsibility by profiting from deductions, exemptions, and funding choices. They guarantee not solely that you just save as a lot tax as you legally can but in addition construct long-term wealth by way of personalised funding and tax plans.

4. Subtract tax deducted at supply

TDS already deducted, otherwise you anticipate can be deducted, might be subtracted to reach at your web tax legal responsibility. You can even subtract any eligible aid like underneath Part 87A to find out the quantity of tax owed. If this determine is above Rs. 10,000, you could pay advance tax earlier than the required due dates and if the TDS paid exceeds your anticipated tax legal responsibility, you needn’t pay any tax upfront.

The right way to Calculate Advance Tax Funds – An Instance

Suppose Raj estimates his skilled earnings after subtracting TDS and deductions for the monetary 12 months can be Rs. 26 lakh. Based on the brand new regime, this earnings would fall within the highest tax slab, 30%. This implies, his whole tax legal responsibility (cess added) can be round Rs. 5 lakh. Assuming he hasn’t opted for the presumptive taxation scheme, right here’s how he could make his advance tax fee in 4 installments:

installment 1: Fee due on or earlier than fifteenth June

15% of Rs. 5 lakh = Rs. 75,000

installment 2: Fee due on or earlier than fifteenth September

45% of Rs. 5 lakh = Rs. 2,25,000. Since Raj already paid Rs. 75,000 within the first installment, he can subtract it from this one. So his second advance tax fee can be Rs. 2,25,000 – Rs. 75,000 = Rs. 1,50,000

installment 3: Fee due on or earlier than fifteenth December

75% of Rs. 5 lakh = Rs. 3,75,000. Identical to earlier than, we’ll subtract the primary and second installment quantities, which means his third fee can be Rs.  Rs. 1,50,000. By fifteenth December, Raj can have cleared 3/4th of his tax legal responsibility.

installment 4: Fee due on or earlier than fifteenth March

Tax left = Rs. 5,00,000 – Rs. 3,75,000 = Rs. 1,25,000

With these 4 funds, Raj avoids a big lump sum burden on the finish of the monetary 12 months and the federal government can preserve a gradual movement of income all year long.

Advance Tax Slabs and Charges

The advance tax charges are:

• 15% by fifteenth June
• 45% by fifteenth September
• 75% by fifteenth December
• 100% by fifteenth March

Bear in mind this isn’t a separate tax. The advance tax share merely tells you the portion of your tax legal responsibility due earlier than a specified date. Your legal responsibility remains to be calculated primarily based on the outdated or new tax regime as there isn’t a separate advance tax slab.

Avoiding Penalties for Late Advance Tax Funds

You will need to notice if the due dates for making advance earnings tax funds are missed, the Earnings Tax Division imposes curiosity on the due quantity. In the event you miscalculate your anticipated earnings and pay much less tax than required by the primary due date, you’ll be charged a 1% curiosity monthly on the remaining quantity. This curiosity is utilized underneath Part 234B and Part 234C of the Earnings Tax Act. 

The penalty may even apply in case you miss the subsequent fee deadline. Failing to pay the third or last installment, will lead to a 1% easy curiosity being charged every month on the unpaid tax till the complete quantity is cleared. In the event you fail to pay a minimum of 90% of the overall tax earlier than thirty first March you’ll be charged 1% monthly on the quantity unpaid.

Step-by-Step Information to Paying Advance Tax On-line

One could make advance tax fee on-line by following these easy steps:

1. Go to the Earnings Tax Division’s official e-filing portal.
2. Search for the ‘e-Pay Tax’ choice which might be discovered within the dropdown part underneath Fast Hyperlinks.
3. You can even simply discover it by way of the search bar.
4. You’ll be prompted to enter your PAN or TAN particulars and cellular quantity. Enter them and press proceed. When you obtain the OTP, enter it and press proceed once more.
5. On the brand new web page, click on on the ‘Earnings Tax’ tab and proceed.
6. Select the evaluation 12 months. Within the ‘kind of fee’ field choose ‘Advance Tax (100)’ and click on on proceed to proceed.
7. Right here you’ll have to fill in just a few particulars like tax, surcharge, cess, curiosity, and others. Fill them precisely and click on proceed.
8. Select your most popular mode of fee from debit card, NEFT, RTGS, and web banking.
9. You’ll lastly land on a abstract web page the place you may assessment your particulars. Confirm them and when you’re glad, press pay now.
10. That’s it! The subsequent display ought to present you an acknowledgement containing the BSR code and challan quantity. You need to save a replica as you’re going to wish it later on the finish of the 12 months when submitting returns.

Conclusion

In case your tax legal responsibility exceeds Rs. 10,000 you could pay advance tax in installments all year long. In the event you estimate your gross taxable earnings after subtracting TDS and aid exceeds this quantity, you may make acceptable funds earlier than the deadlines specified by the federal government. Delays and non-payment of advance tax can lead to curiosity penalties.

Since an affordable estimate of your tax legal responsibility is essential, it’s best to use a tax calculator 2024-25 up to date with the newest earnings tax slab charges to find out it. You need to use our free on-line tax calculator to make sure accuracy. The beginning of the monetary 12 months is a superb time to start tax planning because it provides you ample time to create tax-saving methods. 
Because the monetary 12 months 2025-26 approaches, why not give our consultants an opportunity? Our funding planner will make sure you obtain personalised tax-saving recommendation on investments, insurance coverage, and loans. We additionally ensure you precisely and well timed file your returns and adjust to the newest tax rules. Get in contact with our advisors at present!