The income tax department has pulled up around 500,000 people for not paying advance tax, according to a recent media report.
Failing to pay advance tax on time would lead to penalties, so make sure you pay it before the September 15 deadline.
The income tax department has pulled up around 500,000 people for not paying advance tax, according to a recent media report.
Advance tax is a tax payment system where individuals and businesses pay their income tax obligations in regular instalments throughout the fiscal year, as opposed to deferring the full payment until the year’s end.
Incidentally, the next deadline for paying advance tax for the financial year FY 2023-24 or assessment year AY 2024-25 is September 15, 2023 and you could be penalised for not paying the tax before the due date.
According to Suneel Dasari, founder and CEO, EZTax.in, a tax filing portal, every taxpayer whose annual estimated tax liability exceeds Rs 10,000 has to make a payment. However, senior citizens (60 years and above) are not required to pay advance tax if their income is not from a business or profession.
Seniors are permitted to pay their tax obligations through self-assessment. Also, taxpayers who comply with Sections 44AD and 44ADA are required to pay advance tax in only one instalment, on March 15 of each fiscal year.
Says Divakar Vijayasarathy, founder, CEO, DVS Advisors, a Chennai-based tax advisory firm: “It is to be noted that at least 90 per cent of the total tax liability shall be paid as advance tax, failing which interest shall be attracted at the rate of one per cent per month.”
Advance tax needs to be paid in four instalments as mentioned below.
Due Date and Advance Tax Payment Percentage-
On or before June 15: 15% of advance tax
On or before September 15: 45% of advance tax less advance tax already paid
On or before December 15: 75% of advance tax less advance tax already paid
On or before March 15: 100% of advance tax less advance tax already paid
Source: DVS Advisors
The payment of advance tax includes estimating the total income for the year and the expected tax deducted at source (TDS) on the same.
Says Vijayasarathy: “The balance tax liability (total tax liability less TDS) arising consequent to the same shall be paid proportionately as provided in the table. However, the tax on capital gains and dividends received or accrued during the year need not be estimated and shall be paid only upon receipt or accrual of the same.”
Adds Dasari: “If the deadline is missed, the taxpayers are required to pay a three per cent quarterly penalty. Therefore, it is recommended that taxpayers pay the necessary taxes in advance.”
So, if you need to pay advance tax, set your alerts and pay it before September 15, 2023.