Decoding Advance Tax: Know who needs to pay and when. Expert guidance for meeting tax obligations and deadlines
To ensure compliance with tax regulations, taxpayers are required to fulfill advance tax obligations through four scheduled installments before the end of the financial year. These installments are due on June 15th, September 15th, December 15th, and March 15th, respectively.
“Not meeting these deadlines could mean you'll be charged one percent monthly interest on any overdue amount. Taxpayers using presumptive taxation must pay advance tax all at once by March 15 of the fiscal year,” Hemal Zobalia, Partner, Deloitte India said
Advance tax is typically required to be paid by individuals and entities with significant tax liabilities. Here are the key categories of taxpayers who should pay advance tax:
Individuals (including salaried employees): If your total tax liability after accounting for TDS (Tax Deducted at Source) is expected to be Rs 10,000 or more for the financial year, you are required to pay advance tax.
Self-Employed And Professionals: Individuals earning income through business, freelancing, consultancy, or any profession are also liable to pay advance tax if their estimated tax liability exceeds Rs. 10,000 for the financial year.
Corporate Entities: All companies, including public and private limited companies, are required to pay advance tax. The due dates and percentages may vary based on the company's size, revenue, and profit.
Partnership Firms And LLPs: “Partnership firms and Limited Liability Partnerships (LLPs) should also pay advance tax if their estimated tax liability exceeds Rs 10,000 for the financial year.
Non-Resident Taxpayers: Non-resident individuals and foreign companies earning income in India are subject to advance tax requirements if their tax liability crosses the Rs 10,000 threshold,” Abhishek Soni, CEO, Tax2Win, an income tax portal said.
Capital Gains: Individuals earning capital gains from the sale of assets such as real estate, stocks, or other investments may need to pay advance tax if their estimated capital gains tax liability is Rs 10,000 or more.
Businesses With Specified Incomes: “Some businesses, such as lottery and horse racing, are required to pay advance tax on specified incomes irrespective of the Rs 10,000 threshold,” Soni said.
Advance tax must be paid in four installments according to the following schedule as per DVS Advisors:
By June 15: 15 per cent of advance tax
By September 15: 45 per cent of advance tax minus advance tax already paid.
By December 15: 75 per cent of advance tax minus advance tax already paid.
By March 15: 100 per cent of advance tax minus advance tax already paid.
Paying advance tax involves estimating the total income for the year and the expected tax deducted at source (TDS) on that income.
Hence, if you have to pay advance tax, make sure to set reminders and pay it before March 15, 2024.