Know Who Should Pay Advance Tax

Advance tax is a type of income tax that is paid in advance well before the end of the year. We all know that the usual income tax is paid as a lump sum amount at the end of the financial year. But when it comes to Advance tax, which is also known as pay as you earn tax, payments have to be made in installments according to due dates provided by the Income Tax Department.

There are certain conditions set by the government when it comes to income, and you fall under the category you must pay advance tax.

Salaried individuals, freelancers and businesses

If you’re either a salaried individual, a freelancer or a business, and if your annual tax liability is Rs. 10,000 or more, then you must pay advance tax. However, if you’re a senior citizen older than 60 years and you do not run a business, then you are exempted from paying advance tax.

Presumptive Income for businesses

The Presumptive taxation scheme under Section 44AD says that businesses whose turnover is less than 2 crore per annum can calculate their tax on an estimated profit, or a ‘presumptive income’. All businesses that have opted for presumptive taxation have to pay their advance tax as a lump sum amount by 15th of March every year.

Presumptive Income for professionals

A presumptive taxation scheme under Section 44 ADA is also applicable for professionals like doctors, lawyers and architects if their income is less than Rs. 50 Lakh in a financial year. Even such individuals have to pay their advance tax in its entirety before the 15th of March every year.

To summarize if an individual has calculated tax liability that is Rs. 10,000 or more in a financial year, then they will have to do the Advance Tax payment as per the dates given above. They can be salaried persons, freelancers or businessmen or women. Another category is anyone that falls under the presumptive taxation scheme, who can be doctors, lawyers or business people. They too, are required to pay full advance tax before the due date.So if you fall under any of these categories, contact your accountant and make sure that you pay your advance tax correctly.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.