What is Advance Tax? 

Advance tax, also known as the pay as you earn tax, is to be paid by individuals who earn through sources of income other than their salary, such as investments, lotteries, rent, etc. To pay advance tax, the taxpayer needs to estimate their income and then compute the estimated tax on the same to understand how much tax they need to pay. These are the reasons why advance tax is important:

• The process of income tax collection can be quite cumbersome and detailed. By ensuring that advance tax is collected in instalments throughout the year, the entire process can be better managed, and tax collection becomes easier for the authorities.
• Since advance tax payment is a basic requirement under the law, the taxpayer should be able to compute and estimate whether they need to pay advance tax or not. This is, however, the responsibility of the taxpayer since the authorities cannot make an estimation of the income earned by the individual.

In these few steps, you can find out whether you need to pay advance tax and how much advance tax you need to pay:

• Calculate the income you have earned during the fiscal year for which the advance tax has to be calculated. Here are the following heads of income that should be considered for the income earned:
  
  
  • Income from interest on FDs, savings accounts, etc.
  • Professional income
  • Rental income
  • A minor’s income if it is added to the taxpayer’s income
  • Capital gains
  • Any other income
• Include your salary to the income above and know the gross taxable income (here, advance tax is not applicable, but the sum total could change your tax slab and the tax liability)
• Calculate the payable tax by using the latest income tax slab as relevant to you.
• Deduct the Tax Deduction at Source (TDS) as per the TDS slab that is applicable.
  
  

If your tax liability after TDS is above ₹10,000, you will have to pay advance tax.

You should be paying advance income tax if you:

• Are a self-employed individual
• Are a lottery winner
• Earn rent from house property
• Earn interest on fixed deposits
• Earn income from capital gains on shares

Salaried, freelancers and businesses:

As a salaried employee, a freelancer or a businessperson, your total tax liability should be at least ₹10,000 or above for a financial year if you are liable to pay advance tax.

Presumptive income for Businesses:

If you select the presumptive taxation scheme under section 44AD, you will have to pay the entire advance tax amount in a single instalment on or before 15^th March. Alternatively, you can pay all of your taxes by 31^st March.

Presumptive income for Professionals:

If you are an independent professional such as an architect, doctor, lawyer, and so on, and have opted for the presumptive scheme under section 44ADA, you can pay the entire advance tax amount in a single instalment on or before 15^th March or all of your tax dues by 31^st March.

To pay advance tax online, you will have to make the payment through Challan 280, also known as ITNS 280, which has to be submitted on the official website of the Tax Information Network of the Income Tax Department (TIN NSDL).

Tax payment in itself can be a lengthy process that involves quite a bit of paperwork and may take up some time. To ease the process of advance tax payment, the e-tax system by the Income Tax Department enables taxpayers to pay their taxes online faster and in a more convenient manner.

Here is how you can make an advance tax payment online:

1. Visit http://www.tin-nsdl.com and go to “e-payment” under Services to Pay Taxes Online. Alternatively, you can also click on the "e-pay taxes" tab.
2. Select the appropriate challan from the list given. For instance, select ITNS 280 for the payment of advance tax.
3. Enter PAN or TAN details and other information as needed, e.g., the taxpayer’s address, bank details, etc.
4. Once the data is submitted, you will be able to see a confirmation. The PAN/TAN validity as per the ITD PAN/TAN master will show the taxpayer's full name on the confirmation screen.
5. Once the confirmation of the data is complete, the taxpayer will be redirected to the net-banking website of your bank from which the payment is to be made.
6. Next, log in to your online banking website to fill in the payment details and proceed with the advance tax payment.
7. After this step, you will see a challan counterfoil with the CIN, payment details and your bank name, which is proof of the advance tax payment.

Advance Tax Payment for self-employed individuals and business owners

Advance Tax Payment for Companies

This is how you can check your advance income tax payment status through Form 26AS:

1. Log on to the ‘e-Filing’ Portal https://www.incometax.gov.in/iec/foportal/
2. Go to 'My Account', and click on 'View Form 26AS (Tax Credit)'.
3. Go through the disclaimer, click 'Confirm' and you will be directed to the TDS-CPC Portal.
4. Once there, go ahead with the acceptance of usage and click on 'Proceed'.
5. Next, click on ‘View Tax Credit (Form 26AS), ’Select the ‘Assessment Year’ and ‘View Type’ (type of file – HTML/PDF/Text) and then ‘View / Download’.
   
   

You can also visit the TIN NSDL website to check your advance income tax payment status:

1. Go to the official website: https://tin.tin.nsdl.com/oltas/index.html
2. Select one – the TAN (Tax Deduction Account Number)-based view or the CIN (Challan Identification Number)-based view.
3. Fill in all the necessary details correctly to check the status.
4. As a tax deductor, one can download the Challan Details file for a specific period through the TAN-based view to verify the Challan entries made in the e-TDS/TCS statement.
5. If you want to check the status at the collecting bank branch, here is how you can do it:
   
   

The tax collecting branch can view the total amount and the total number of challans for each major head code after you provide the branch scroll date and the major head code. They can also check the following information:

• Challan Tender Date
• Name of Taxpayer
• Challan Serial Number
  
• PAN/TAN
• Date of receipt by TIN
• Amount

At the nodal bank branch, the nodal branch can view these details:

• Nodal Branch Scroll Number
• Number of Challans
• Major Head Code – Description
• Scroll Date
• Number of Branches
• Total Amount

Moreover, for every Nodal Branch Scroll Number, the following details can be viewed:

• BSR Code
• Date of receipt by TIN
• Total Amount
• Branch Scroll Number
• Number of Challans
• Branch Scroll Date

Since advance tax payment is made in instalments throughout the financial year, it is necessary to pay 15% of the tax by 15^th June, 45% of the advance tax by 15^th September, while 75% of the tax should be paid by 15^th December and 100% of the advance tax payment should be made by 15^th March.

If you opt for the presumptive taxation scheme, be sure to pay 100% of advance tax on or before 15^th March during the financial year.

Yes, an NRI will have to pay advance tax if their tax liability is above Exemption to Senior Citizens from Advance Tax Income Payment 10,000 during the financial year. If advance tax is not paid then under Section 234B (delay in advance tax payment) and Section 234C (deferred instalments in advance tax payment), applicable interest may be charged.

Since senior citizens do not have a business income, they do not need to pay advance tax during the financial year. However, there is a self-assessment tax that needs to be paid after the final tax liability has been calculated for the financial year.

Yes, you can consider the deductions under Section 80C of the Income Tax Act while calculating your advance tax payment, like in the case of income tax payments.

The advance tax payment as per the schedule is 15^th June, 15^th September, 15^th December and 15^th March. However, if you are unable to pay the last instalment of your advance tax by the due date, you will be charged simple interest at the rate of 1% on the taxes due under Section 234B of the Income Tax Act.

Under this Section, you should have paid 90% of the tax payable by the end of the fiscal year. Since the third instalment to be paid on 15^th December is 75% of the advance tax, be sure not to skip your 4^th instalment on 15^th March.

Under Section 234B of the Income Tax Act, the payment of less than 90% of the advance assessed tax before the due date will attract an interest penalty of 1% per month. If the advance tax paid exceeds your total tax liability, you will receive a refund on the additional sum, and the Income Tax Department pays 6% every year on the additional amount if it is over 10 percent of your tax liability.

Yes, you can claim a tax deduction under Section 80C of the Income Tax Act only after you pay the self-assessment tax and not before you do so.

Yes, any tax paid until 31^st March will be considered as advance tax. In case the bank is closed on the day that you want to make your advance tax payment, you can make the tax payment soon on the next working day.

You can write a check for the advance tax payment by downloading the challan at- https://www.incometaxindia.gov.in/Forms/107010000000345598.pdf. Once you fill in the details, keep the following things in mind:

• Use a separate challan for each type of payment.
• Compulsorily mention all the PAN details correctly.
• Issue the cheque/DDs towards payment of income tax as “Pay --- (Bank name where the Challan will be deposited) A/c Income Tax.
• Check that the bank’s acknowledgement has the BSR code of the bank branch, the date of deposit of challan, and the challan serial number. These will be needed for filing your Income Tax Return.

You can download the advance income tax payment receipt by visiting https://tin.tin.nsdl.com/oltas/index.html, selecting the CIN (Challan Identification Number) Based View and downloading or taking a screenshot of the CIN after clicking on view.

Yes, if a taxpayer chooses presumptive taxation as a business or as a professional under Sections 44AD or 44ADA, they will pay advance tax. They have to pay the whole advance tax amount in a single instalment on or before 15^th March or all their tax dues by 31^st March.

The Assessing Officer should calculate the advance tax liability through a written order or amended order anytime during the financial year but not after the last day of February.

Under Section 234B of the Income Tax Act, simple interest at the rate of 1% per month will be charged if you pay less than 90% of the advance assessed tax. The interest rate will be calculated for each defaulted month’s amount until the advance tax payment is complete. And under Section 234C of the Income Tax Act, an interest penalty of 1% is charged if the advance tax instalments are not paid on time by their respective deadlines.

• Source: https://incometaxindia.gov.in/
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• L&C/Advt/2022/Sep/2111