This is the income tax that is payable if your tax liability exceeds Rs 10,000 and should be paid in the same year in which income is received. It is also called as “Pay as you Earn” scheme, since you pay the tax in the same year in which you earn income.
For e.g. If estimated tax is Rs. 10,300 of an individual (Non-Corporate Assessee), advance tax is payable will be; On or before 15th September – first 30% of Rs. 10,300 = Rs. 3,090 Rs.(total=3,090) On or before 15th December – next 30% of Rs. 10,300 = Rs. 3,090 Rs.(total=6,180) On or before 15th March – balance 40% of Rs. 10,300 = Rs. 4,120 Rs.(total=10,300)
Senior Citizens are exempted from paying Advance Tax
Senior citizens (age 60 years on or before the end of previous year) have been provided exemption from paying advance tax with effect from April 1, 2012. Remember, it’s applicable to those senior citizens who do not have income from business or profession. Accordingly, they can calculate their liability at the end of the year and deposit all taxes at that time as self-assessment tax.
What are the consequences of nonpayment of Advance Tax?
If the amount of advance tax paid is not paid or paid less you will have to pay penalty interest as per the below
For Non Corporate Assessee
- If advance tax paid in the first two installments is less than specified, simple interest @ 1% per month is charged on the deficit amount for a period of 3 months.
- If the aggregate of advance tax paid is less than 90% of tax payable on 15th March penalty of simple interest @ 1% per month is charged on the amount shortfall until the tax is paid
For Corporate Assessee
Simple interest @ of 1% is charged on the deficit amount for a term of 3 months if you have failed to pay advance tax or if advance tax paid is less than tax due as per the above slab. For the 4th and final installment if the advance tax paid is less than 90% of tax payable simple interest @ 1% per month is charged on the deficit from 1st April until the tax is fully paid.
What happens if excess Advance Tax have been paid?
If the amount paid as advance tax is higher than the total tax liability, the assessee will receive the excess amount as a refund. Interest @6% p.a will be paid by the income tax department to the assessee on the excess amount if the excess amount is more than 10% of tax liability.
How to pay advance tax?
Advance Tax could be paid using a Tax Payment Challan at designated branches of banks empanelled with the Income Tax Department. Branches of ICICI, HDFC and SBI accept Advance Tax Payment Challans. Alternatively, individuals can pay Advance Tax online through the Income Tax Dept / NSDL website. https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp and use CHALLAN NO. /ITNS 280