Tax payers are expected to be aware of the fact that filing of advance tax is indispensable not only for businesspersons but for others too, such as professionals, freelancers and salaried persons.
Since the last date to file advance tax is March 15, it is vital to clear the tax dues prior to this date.
According to the Tax department’s official website, every individual whose estimated tax liability for the year is ₹10,000 or more shall, as per section 208, pay his tax in advance in the form of advance tax.
However, the rule does not apply to senior citizens who are not supposed to pay any advance tax unless they have an income from a business or profession.
“If your tax liability is more than ₹10,000 after payment of TDS, then you are liable to pay advance tax,” says Mumbai-based Chartered Accountant Chirag Chauhan from CA Chauhan & Company.
He adds that this kind of situation usually occurs in one of the following situations:
“After changing job, one might forget to disclose income from previous job at the new workplace. In another scenario, taxpayer earned an income from other sources such as interest, rent or capital gains. Also, taxpayer has another source of income and TDS paid by them did not cover the overall tax liability,” Mr Chauhan adds.
For self-employed individuals
These tax payers are meant to do a rough estimate of their total annual income and accordingly calculate the tax liability on it.
Let’s suppose, the estimated tax liability is more than ₹10,000, then they are meant to pay advance tax in four instalments during the financial year.
The due dates for advance tax taxpayment for self-employed individuals are June 15, September 15, December 15, and March 15.
| Date | Proportion of advance tax to be paid |
| June 15 | Minimum 15% |
| Sep 15 | Minium 45% |
| Dec 15 | Minimum 75% |
| March 15 | Minimum 100% |
(Applicable for all assesses other than those eligible for presumptive taxation scheme)
What is presumptive tax scheme?
A taxpayer can adopt the presumptive taxation scheme and declare income at a prescribed rate. In return, they are relieved of the duty of maintaining books of account or to get them audited.
For professionals
Independent professionals including lawyers and doctors fall under the presumptive tax scheme under section 44ADA of Income Tax (I-T) Act.
They are meant to pay their entire advance tax in one instalment on or before 15 March. The professionals can pay their tax by March 31 also since any tax paid till March 31 will be treated as advance tax.
Similarly,businesspersons who have opted for the presumptive taxation scheme under section 44AD are meant to pay the entire amount of their advance tax in one instalment on or before March 15.
Even they can pay all their tax dues before March 31.
Avoiding penalty
It is worth mentioning that when a taxpayer fails to pay their income tax prior to the due date, they would be liable to pay interest on the unpaid tax.
The interest is usually very high and is calculated from the due date of payment until the date of payment, at a rate of 1 percent per month, or part of the month.
In conclusion, we can say that all tax payers barring senior citizens are meant to pay advance tax well in time in order to avoid paying heavy penalty at a later stage.
