Advance tax is the amount of income tax that should be paid in installments as per the income tax department's due dates rather than in one lump sum at the end of the fiscal year. Commonly referred to as "pay as you earn" tax, it is intended to be paid in the same calendar year that the income is received. Section 208 of the Income Tax Act requires taxpayers to pay advance tax if their tax due is 10,000 or more in a fiscal year.
Those who earn money from sources other than salaries are subject to advance tax. It applies to self-employed persons, professionals, and business owners whose income exceeds a particular threshold. This comprises of dividends from stocks, interest from fixed-term investments, rent, and rental income. However, advance tax is not applicable to senior adults above the age of 60.
Calculation of Advance tax
Make an estimate of your overall income, excluding your salary. Subtract all of your outgoing costs, such as phone and transportation charges, trip expenses, and medical insurance fees. Add any additional funds you have now received besides your pay. This includes lottery winnings, housing rent, interest on FDs, and more. If the total amount of tax estimated exceeds 10,000, you must pay advance tax.
Payment of Advance tax
The I-T department has established Challan 280 for the payment of advance tax. It may be paid online by going to https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp and selecting the Challan No./ITNS 280 tab. Next, choose "advance tax" and pay online with a debit card or net banking. A tax receipt is shown on the screen when the payment has been made. Download it and keep it on hand for future use.
Due dates of Advance tax
The first installment i.e. 15 percent of the total amount should be paid by 15th June. The payment of second Installment or 45 percent of the tax should be made by 15th of September. The third installment of the 75 percent of the advance tax should be cleared by 15th December. The remaining amount or 100 percent of the tax should be paid on or before 15th March.
Advance tax payments are advantageous to the government as well as the person or entity making them. It offers a consistent stream of revenue to the government throughout the whole year. From the standpoint of the person or organization, it lessens the year-end stress of paying taxes all at once. If advance tax is not paid, the taxpayer may be subject to interest charges under income tax legislation. Therefore, advance tax payments should be done on time.
