Advance Tax Liability & Due Dates

Advance tax, also known as pay as you earn tax, is the income tax paid in instalments during the year rather than a lump sum at the end of the year. It is applicable to individuals, firms, and companies having an estimated tax liability of more than ₹10,000 in a financial year. The due dates for advance tax instalments are spread throughout the year to ease the burden of paying a large sum at once.

Who needs to pay advance tax?

Any individual, firm, or company with an estimated tax liability exceeding ₹10,000 in a financial year is required to pay advance tax. This includes income from business, profession, capital gains, or other sources. However, if an individual's income is only from salary and the tax is deducted by the employer, they may not need to pay advance tax.

Due dates for advance tax instalments

The due dates for advance tax instalments are as follows:

Instalment	Due Date	Percentage of Total Tax Liability
1st Instalment	15th June	15%
2nd Instalment	15th September	45%
3rd Instalment	15th December	75%
4th Instalment	15th March	100%

Consequences of not paying advance tax

If an individual or business fails to pay advance tax or pays less than the required amount, they may be liable to pay interest under sections 234B and 234C of the Income Tax Act. The interest rates are as follows:

• Interest under section 234B: 1% per month or part of the month on the amount of tax payable
• Interest under section 234C: 1% per month or part of the month on the amount of instalment payable

The most important thing to remember is that advance tax is a way to avoid paying a large sum of tax at the end of the year, and it helps in reducing the burden of tax payment. It is essential to estimate the tax liability accurately and pay the instalments on time to avoid interest and penalties.

Presumptive taxation scheme

The presumptive taxation scheme is an optional scheme for small businesses and professionals, where the tax liability is calculated on a presumptive basis. The scheme is applicable to businesses with a turnover of up to ₹2 crores and professionals with a gross receipts of up to ₹50 lakhs. Under this scheme, the tax liability is calculated at a rate of 8% of the turnover or gross receipts, and the advance tax instalments are paid accordingly.

Frequently Asked Questions

What is the threshold limit for paying advance tax?

The threshold limit for paying advance tax is ₹10,000. If the estimated tax liability for the year is more than ₹10,000, advance tax needs to be paid.

Can I revise my advance tax instalments if my income increases or decreases during the year?

Yes, you can revise your advance tax instalments if your income increases or decreases during the year. You can estimate your revised tax liability and pay the remaining instalments accordingly.

What happens if I fail to pay advance tax or pay less than the required amount?

If you fail to pay advance tax or pay less than the required amount, you may be liable to pay interest under sections 234B and 234C of the Income Tax Act. The interest rates are 1% per month or part of the month on the amount of tax payable or instalment payable.

The bottom line

Advance tax is an important aspect of income tax compliance in India. It helps in reducing the burden of tax payment and avoiding interest and penalties. It is essential to estimate the tax liability accurately and pay the instalments on time to avoid any consequences. Verify the current figures and rates as they may change over time.