What is Advance Tax?
Advance Tax is a system under which taxpayers are required to pay income tax in installments throughout the financial year, as they earn their income, instead of paying the entire amount at the end of the year.
This system ensures a steady flow of revenue for the government and helps taxpayers avoid a heavy financial burden during the year-end filing.
Who is Liable to Pay Advance Tax?
Any individual, company, or entity whose estimated tax liability for a financial year is ₹10,000 or more is required to pay advance tax.
However, resident senior citizens aged 60 years or above who do not have income from business or profession are exempt from paying advance tax.
Why is Advance Tax Important?
Advance tax ensures that income tax is collected as the income is earned, promoting financial discipline and timely compliance.
Under this system, the taxpayer estimates the total income for the year, calculates the corresponding tax liability, and pays the tax in specified installments.
By paying advance tax:
- Taxpayers avoid interest penalties for delayed payments.
- The financial burden is distributed evenly across the year.
- The government maintains regular cash flow for public expenditure.
How to Calculate Advance Tax
To determine your advance tax liability, follow these steps:
- Calculate Gross Total Income (GTI):
Add income from all sources — salary, business or profession, house property, capital gains, and other income. - Deduct Allowable Deductions:
Subtract deductions under Sections 80C, 80D, 80E, etc., from your GTI to arrive at Net Taxable Income. - Apply Tax Slab Rates:
Apply the applicable income tax slab rate to your taxable income to calculate total tax liability. - Adjust for TDS/TCS:
Subtract any Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) from the total tax to determine the advance tax payable. - Pay the Advance Tax:
Make the payment online through the income tax portal and retain the payment receipt for future reference while filing your Income Tax Return (ITR).
Advance Tax Payment Schedule
Advance tax must be paid in installments as per the due dates below:
| Due Date | Advance Tax Payable |
| On or before 15th June | At least 15% of total tax liability |
| On or before 15th September | At least 45% of total tax liability |
| On or before 15th December | At least 75% of total tax liability |
| On or before 15th March | 100% of total tax liability |
(Note: For taxpayers opting for the presumptive taxation scheme under Sections 44AD or 44ADA, the entire advance tax is payable by 15th March.)
Consequences of Non-Payment or Late Payment
If advance tax is not paid within the prescribed timelines, the taxpayer is liable to pay interest under Sections 234B and 234C of the Income Tax Act.
A simple interest of 1% per month is levied on the outstanding amount until the liability is cleared.
How to Pay Advance Tax Online
Here’s a step-by-step guide for paying advance tax through the Income Tax Department’s online portal:
- Visit the Income Tax e-Payment Portal and log in using your credentials.
- Go to ‘Services’ → ‘e-Payment’.
- Select ‘Challan No./ITNS 280’ from the available options.
- Enter the required details and choose ‘Advance Tax (100)’ as the payment type.
- Select the Assessment Year and your preferred mode of payment (Debit Card or Net Banking).
- Verify all information and click on ‘Submit’.
- Complete the payment through your bank’s secure gateway.
- After successful payment, download and save the acknowledgment receipt for record-keeping and tax filing purposes.
Conclusion
Advance Tax is a vital component of India’s tax system, promoting timely revenue collection and reducing year-end stress for taxpayers. By estimating income accurately and paying taxes as per schedule, taxpayers can remain compliant and avoid penalties.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.