ITR-Advance Tax eFiling
Advance Tax in India refers to the payment of income tax in installments throughout the financial year, instead of paying a lump sum at the end of the year. It is essentially a “pay-as-you-earn” tax system to reduce the year-end tax burden and ensure timely collection for the government.
What is Advance Tax? Advance Tax is the tax that an individual, business, or entity needs to pay during the financial year on estimated total income if their tax liability exceeds ₹10,000 in a financial year. It applies to all types of taxpayers, including individuals, freelancers, businesses, and companies.
Who is Liable to Pay Advance Tax?
a. Applicable to:
Individuals: Salaried, self-employed, and professionals.
Businesses: Sole proprietorships, partnerships, and companies.
Freelancers: Independent contractors or gig workers with substantial income.
Taxpayers under Presumptive Taxation Scheme: Those declaring income under Sections 44AD or 44ADA.
b. Exceptions:
Senior citizens (aged 60 or above) not running a business are exempt from paying advance tax.
Taxpayers whose total tax liability is less than ₹10,000 after TDS deductions.
For Presumptive Taxation (Sections 44AD/44ADA)
Entire tax liability (100%) must be paid by 15th March of the financial year.
How to Calculate Advance Tax?
Estimate Total Income: Include all income sources (salary, business/profession, capital gains, rent, etc.).
Deduct Eligible Deductions: Subtract exemptions and deductions under sections like 80C, 80D, etc.
Compute Tax Liability: Apply the applicable income tax slab rates.
Subtract TDS: Deduct any TDS (Tax Deducted at Source) already collected.
If Liability > ₹10,000: Pay advance tax in installments.
Penalty for Non-Payment or Late Payment
a. Interest under Section 234B
Levied if 90% of total tax liability is not paid by the end of the financial year. Interest: 1% per month or part thereof on the unpaid amount.
b. Interest under Section 234C
Levied for late payment of installments.
Interest: 1% per month or part thereof for the shortfall in each installment.
Benefits of Advance Tax
Reduces the year-end tax burden.
Avoids penalties for underpayment of tax.
Facilitates better cash flow management for the government and taxpayers.
Ensures regular compliance with tax laws.
Common Scenarios Requiring Advance Tax Payment
Freelancers or Professionals: Income without TDS deduction.
Business Owners: Profits subject to income tax.
Rental Income: Additional taxable income not covered by TDS.
Capital Gains: Sale of shares, mutual funds, or property.
Dividend Income: High dividend income exceeding TDS coverage.
Recent Changes and Updates
Relaxation During COVID-19: Deadlines extended in certain financial years.
Online Payment Modes: Streamlined digital payment options.
Increased Monitoring: Automated notices for non-compliance.
Tips for Advance Tax Payers
Maintain updated financial records for accurate estimates.
Monitor income periodically, especially for variable income earners.
Factor in deductions and exemptions before calculating liability.
Use online calculators or consult a tax professional for accuracy.
Avoid last-minute payments to minimize interest under Sections 234B and 234C
