Advance tax, or pay-as-you-earn tax, should be paid in advance instead of lump sum payments at year-end. These payments must be made in instalments as per due dates provided by the income tax department.
"Advance tax needs to be paid by any person whose tax liability is Rs 10,000 or more in a financial year. The advance tax applies to all taxpayers, salaried, freelancers, and businesses. Senior citizens, who are 60 years or older, and do not run a business, are exempt from paying advance tax," says Archit Gupta, founder and CEO of Cleartax, a tax portal.
Also, your employer would pay your advance tax if you're a salaried person. You need to pay your advance tax in four instalments- 15 per cent, 45 per cent, 75 per cent, and 100 per cent – on or before June 15, September 15, December 15, and March 15, respectively, of the financial year .
If you miss the tax payment, you will have to pay penal interest on the taxes due under sections 234B and 234C of the Income Tax Act, 1961.
As the date of the second instalment of advance tax nears, it would be important to keep the following points in mind:
Wrong Details And Assessment Year: When filling in the details for your advance tax, you must ensure you give the correct information and assessment year. If you do not put in the details carefully, you will be in trouble. Unfortunately, many people make mistakes while including the right assessment year.
Include Income From All Sources: When calculating your tax liability, you must include an account from all incomes, irrespective of how small they are. Taxpayers often miss out on including interest from a savings bank account, income from the sale of mutual funds, fixed deposits, income from the sale of property, and so on, while estimating their advance tax liability.
Do Not Try To Pay Advance Tax For Senior Citizens: Senior citizens (individuals of age 60 years or above) are exempt from paying advance tax. Having said that, some senior citizens can still pay advance tax, like people who have income from business and profession, apart from revenue under other income heads.
Do Not Pay Advance Tax If You’re Salaried: If you are a salaried person, your employers are required to deduct the applicable tax from the monthly salary. However, advance tax payment may be applicable if you have other income sources.
