Advance Tax Payment: Due Dates, Instalments & Calculation

A taxpayer, liable to pay more than Rs. 10,000 as income tax in a financial year, should pay advance tax as per the IT laws in India. This includes salaried employees, self-employed professionals, freelancers, and even businesses.Also known as “pay as you earn tax”, advance tax requires you to pay income tax in smaller instalments within the prescribed due dates rather than paying a lump sum amount at the end of the financial year.So, what are the instalments and due dates for paying advance income tax ? Let us have a look-

Advance tax payments are divided into four instalments in India. Each instalment has its due date spread across a financial here. Let us try to understand this with an example.Let us assume that Ms Priyanka is liable to pay Rs. 40,000 as advance tax in a financial year. So, here is how the IT laws require her to pay this amount-Here are the instalments and due dates-

So, rather than paying Rs. 40,000 at the end of the financial year, she will pay the advance tax in smaller instalments as per the prescribed due dates and percentage.

There are also a few exclusions in the IT laws for advance tax. For instance, senior citizens above the age of 60 years who are not running a business are exempt from advance tax.Also, the due dates and instalment system is not available for businesses and self-employed professionals who have opted for presumptive taxation under Section 44AD or Section 44ADA. They are required to pay the advance tax in a single instalment on or before March 15th.

Late payment of advance tax attracts penalties in the form of interest payments. Under Section 234C of the IT Act, non-payment of advance tax as per the prescribed due dates and instalments will require the taxpayer to pay a monthly penalty of 1% on the outstanding liability.Also, under Section 234B of the IT Act, it is mandatory to at least pay 90% of the advance tax before the financial year ends. Non-payment will attract penalty interest at the rate of 1% per month on the outstanding amount.

In case if you are liable to pay advance tax, it can be easily paid online by visiting the official TIN -NSDL website. Just like regular tax payment, one can use Challan 280 for paying advance tax.Calculate your tax liabilities carefully and note the due dates and instalments to avoid getting penalised.

Advance tax payments are to be made in four instalments throughout the course of a financial year. Therefore, advance tax has to be paid every quarter. If a taxpayer misses the due date of making an advance tax payment, a penalty will be charged in the form of interest. As per Section 234C of the Income Tax Act, a monthly penalty of 1% per month is attracted if the taxpayer misses the deadline for making advance tax payments. This 1% is calculated on the outstanding tax amount.For example, if a taxpayer has calculated the income tax liability for the year to be Rs. 1 lakh, 15% becomes due on June 15, which amount to Rs. 15,000. If the taxpayer misses this deadline, interest at 1% per month is attracted. On September 15, the amount that is now due will be 45% of the total tax, which is Rs. 45,000 plus the interest of Rs. 450 (Rs. 15,000 * 1% * 3 months).However, interest, as per Section 234C, is only charged if the following conditions are met.

Therefore, if a taxpayer pays 13% of the advance tax payable instead of 15% that is to be paid before June 15, no interest will be charged.Further, in addition to the interest charged under 234C, if a taxpayer fails to pay at least 90% of the advance tax before the end of the financial year (March 31), the interest of 1% per month will be charged on the outstanding amount.

If advance tax is paid in excess of the actual tax liability, the Income Tax department refunds the excess amount. This refund takes place only after filing the annual return once the return is processed by the Income Tax department. If a taxpayer pays tax more than the amount due in any instalment, the excess amount gets adjusted with future instalments. The refund is only available annually.Further, if the excess tax paid is more than 10% of the tax liability, the Income Tax Department refunds the excess along with a 6% per annum interest from April 1 of the year in which the returns were filed.For example, if the taxpayer has paid Rs. 50,000 as advance tax over the course of the financial year ended March 31, 2022, but the actual tax liability was Rs. 30,000, the Income Tax Department will refund Rs. 20,000 plus interest. Let’s assume the Income Tax Department paid the refund on 15 August 2023, the interest will be calculated as follows:Rs. 20,000 * 6% * 4.5 months / 12(from April 01, 2023 to August 15, 2023 = 4.5 months) = Rs. 450Therefore, the refund that the taxpayer will receive will be Rs. 20,450.

Advance Tax Calculators automatically compute the advance tax payable by a taxpayer in each instalment based on the details entered by the taxpayer. The taxpayer has to enter the basic details to calculate the income tax liability in a financial year. This would include details like net taxable income in the financial year. In order to compute the net taxable income in a financial year, taxpayers have to take into consideration their total income in the financial year and reduce it by any existing deduction that they might have. Some advance tax calculators also ask for specific details like income from different sources and available deductions to compute the net taxable income from scratch.The Advance Tax calculator typically calculates the total tax payable based on the type of taxpayer (individual less than 60 years or not, company, partnership etc.). Based on these details, the income tax liability of the taxpayer is calculated. After adding cess and surcharge (if any) to the income tax liability, the total tax liability is computed.Now, based on this total tax liability, the advance tax instalments are calculated along with the due dates so that the taxpayer knows exactly how much advance to pay before which due date.

In order to pay Advance Tax online, taxpayers can follow this procedure.

• Visit the e-payment website of the Income Tax Department
• Choose the form for payment of Advance Tax based on the type of taxpayer. For individuals, the form is ITNS 280.
• Now, the taxpayer must select the right code to make the payment towards advance tax. The applicable code is 100.
• The taxpayer should now fill in the details like name, PAN number , email address, address for correspondence, phone number, etc.
• Click on proceed.
• The taxpayer will be redirected to the payment gateway, and the taxpayer can make the payment using their preferred method.
• Once the payment is successful, the taxpayer will receive a payment challan called Challan 280 . This challan needs to be saved and can be used at the time of filing returns.

It is important for taxpayers to note that online tax payments can only be done via net banking or debit card payment gateways.

Yes, advance tax regulations apply to NRIs as well. If an NRI has income in India and the income tax liability of the NRI exceeds Rs. 10,000 in a financial year, the NRI will have to pay advance tax in the same manner as other taxpayers. Moreover, the penalties for non-payment or partial payment of advance tax as per Section 234B and 234C also apply to an NRI if they fall under the ambit of paying advance tax. For an NRI, the income tax regulations are slightly different from the regulations of other taxpayers. Most transactions with an NRI require the corresponding party in India to deduct tax on behalf of the NRI and pay it to the government. Therefore, NRIs and parties transacting with NRIs must stay cautious and adhere to income tax regulations.Ready to make the most of your money? Start your tax planning journey now!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.