Advance Tax in India
All taxpayers have a civil obligation to submit payments according to the requirements stated in the Indian Income Tax Act—advance tax functions as a time-sensitive payment method to boost timely tax remittances. The payment of advance tax takes place through scheduled instalments as the income is earned within the same financial year as opposed to the standard annual tax payment. Here, I will explain all vital aspects related to advance tax, including eligibility standards and deadlines, with a step-by-step understanding of the calculation process.
What is Advance Tax?
Under the “pay-as-you-earn” scheme, which is known as advance tax, you make instalments of your income tax throughout the financial year instead of waiting until the end to make one large payment. Taxpayers submit payments of income tax according to earned income for the government to obtain continuous financial resources.
People who derive their income from business ventures or interest payments or rent income, or capital gains should utilise this taxation method. Salaried people must pay advance tax when they receive multiple types of income that avoid TDS (Tax Deducted at Source) procedures. In India, eligibility for advance tax arises when an individual’s total tax liability in a financial year exceeds ₹10,000.
Who is Eligible to Pay Advance Tax?
The following section provides the requirements for paying advance tax within India.
- People who receive salaries alongside freelancers and businesses need to pay their advance taxes when their yearly tax obligation exceeds ₹10,000.
- Individuals who are sixty or older but have no business or profession income do not need to pay advance tax in India.
- The entire advance tax requirement under section 44AD or 44ADA should be paid as a single payment during the March financial year on its 15th day.
Due Dates for Advance Tax Payment
Taxpayers, either as corporate entities or non-corporate ones, must follow different timelines for advance tax payments. General and non-corporate taxpayers must follow these particular deadlines:
| Due Date | Advance Tax Payable |
| 15th June | 15% of total estimated tax liability |
| 15th September | 45% of total tax (cumulative) |
| 15th December | 75% of total tax (cumulative) |
| 15th March | 100% of total tax (cumulative) |
Income Tax will impose interest payments through Sections 234B and 234C when you either fail to make an entire installment payment or pay less than the required amount.
The tax payment for businesses under presumptive taxation must happen as a single amount by March 15th.
How to Calculate Advance Tax?
The following section explains how you should compute your advance tax obligations:
- The total amount of your income starts with your salary, then moves to business or professional activities, and continues with rental revenue as well as dividends and interest payments.
- The payment deducts exemptions under sections 80C for LIC PPF ELSS, along with 80D for health insurance, and exempts payments like HRA and LTA.
- The total tax deduction amount is computed by applying the relevant income tax rate to your final taxable income.
- Any TDS deduction that applied to your income (usually from salary or bank interest) should be subtracted from your total tax liability.
- For tax obligations exceeding ₹10,000, you must make advance tax payments.
- Defer your tax payments by distributing the liability according to the dates found in the initial taxation period.
Example:
You have an annual salary of ₹12 lakhs, together with ₹1 lakh earned from fixed deposit interest.
- Total income: ₹13 lakhs
- Eligible deductions: ₹1.5 lakhs under 80C
- Net taxable income: ₹11.5 lakhs
- Tax liability (approx.): ₹1.57 lakhs
- TDS deducted by employer: ₹1.2 lakhs
- Tax still payable: ₹37,000
The ₹37,000 amount of outstanding tax liability requires advance tax payment following the specified due dates because it exceeds the threshold value of ₹10,000.
Income Tax will impose interest payments through Sections 234B and 234C when you either fail to make an entire instalment payment or pay less than the required amount.
The tax payment for businesses under presumptive taxation must happen as a single amount by March 15th.
How to Pay Advance Tax?
Advance tax can be paid easily online via the NSDL (now Tin-NSDL) portal or through authorised bank branches. Here’s how:
- Visit https://www.tin-nsdl.com/
- Select Challan 280.
- Enter details such as PAN, assessment year, address, and payment type.
- Choose the bank and proceed with payment via net banking or debit card.
- Save the challan receipt for future reference and ITR filing.
Interest Penalties for Non-Payment or Delay
Failing to pay advance tax or paying less than required attracts interest under:
- Section 234B: Interest for non-payment or shortfall in total advance tax (if less than 90% of total tax is paid).
- Section 234C: Interest for delay or default in payment of instalments.
Interest is charged at 1% per month on the defaulted amount.
Why is Advance Tax Important?
- Avoids last-minute financial pressure at year-end.
- Helps in better budgeting and cash flow management.
- Reduces chances of penalties and interest payments.
- Contributes to the government’s funds in a phased manner, supporting public welfare programs.
Get Started with TaxDunia
Advance tax is not just for business owners or high-income earners. With rising incomes from multiple sources like rent, capital gains, and interest, even salaried individuals should assess their tax liability periodically. Understanding the eligibility, keeping track of the due dates, and knowing how to calculate your tax accurately can help you stay compliant and financially prudent. If your income structure changes during the year, recalculate your advance tax liability and pay the difference in subsequent instalments to avoid penalties. A bit of planning today can save you from last-minute tax stress tomorrow!
