How Does Advance Tax Work?
a. Calculation and Due Dates:
The calculation of Advance Tax involves estimating the total income for the financial year and applying the applicable tax rates to arrive at the tax liability. The due dates for Advance Tax payments are staggered throughout the financial year, ensuring timely revenue collection for the government. For individuals, the due dates are typically in four installments: June 15, September 15, December 15, and March 15.
b. Payment Modes and Procedure:
Advance Tax can be paid online through authorized banks or the Income Tax Department's website. Taxpayers can also visit designated bank branches to make payments using physical challans. Payment can be made through various modes such as internet banking, debit card, credit card, or even by visiting the bank in person.
c. Penalty for Non-Payment or Underpayment:
Failure to pay Advance Tax or underpayment of the required amount can attract penalties and interest. Under Section 234B and Section 234C of the Income Tax Act, penalties are levied for defaulting on Advance Tax payments. It is crucial for taxpayers to adhere to the prescribed due dates and payment amounts to avoid unnecessary financial liabilities.
Benefits of Paying Advance Tax:
a. Reduces the Burden of Lump Sum Payment:
One of the primary benefits of Advance Tax is that it eases the burden of making a large, lump-sum payment at the end of the financial year. By distributing the tax liability into smaller installments, taxpayers can manage their finances more effectively.
b. Financial Discipline and Planning:
Paying Advance Tax necessitates better financial discipline and planning. Taxpayers are encouraged to estimate their income accurately and make provisions for tax payments, leading to improved financial management.
c. Helps Avoid Last-Minute Hassles:
Advance Tax eliminates the stress and rush associated with last-minute tax calculations and payments. By staying up-to-date with regular installments, taxpayers can avoid the frantic rush during the tax filing season.
d. Interest on Delayed Payments:
While the timely payment of Advance Tax is crucial, taxpayers who fail to meet the due dates may incur interest charges on the outstanding amount. This interest is calculated based on the delay and can add up over time, making Advance Tax payments a priority.
How Advance Tax Liability is calculated?
| Due Date | Advance Tax Liability Payable | Advance Tax Payable(Rs.) | Amount Already Paid(Rs.) | Balance To Be Paid |
|---|---|---|---|---|
| 15th June | 15% | 1,00,000 x 15%=15,000 | Nil | 15,000 |
| 15th September | 45% | 1,00,000 x 45% =45,000 | 15,000 | 30,000 |
| 15th December | 75% | 1,00,000 x 75% = 75,000 | 45,000 | 30,000 |
| 15th March | 100% | 1,00,000 x 100% = 1,00,000 | 75,000 | 25,000 |
| Total Amount Paid | 1,00,000 | |||
Refund in Advance Tax Payment
At the end of the year, if the Income Tax Department finds out that you have paid more tax than you should have paid, then it will refund the excess amount. Taxpayers can claim refund by filling and submitting Form 30. They have to make the claim within a period of one year from the last year of the assessment year.
