Advance Tax: Applicability, Due Dates for FY 2024-2025, Calculator, Challan, Online Payment
Updated: Oct 23
Advance tax, popularly known as 'pay-as-you-earn', is the practice of making periodic payments toward an estimated income tax liability. It tends to help individual taxpayers, including freelancers and salaried employees, and businesses to deal with their respective tax liability in a more effective manner. This system is mandatory for taxpayers whose estimated tax liability is equal to or exceeds INR 10,000 during the financial year.
This article will walk you through the basics of advance tax, its due dates, calculation method, and online payment process for the FY 2024-2025.
Table of Content
Advance Tax: An Overview
Advance tax refers to the prepayment of income tax by the taxpayers before the end of the financial year. In India, the advance tax mechanism is essential whereby the tax on estimated income is paid in installments rather than paying a single payment at the end of the financial year. Also, this mechanism provides a steady flow of income to the government throughout the year to fund various activities and expenses.
Advance tax is applicable to all types of taxpayers, that is, freelancers, salaried individuals, and businesses whose expected tax liability of INR 10,000 or more during the financial year.
Who is Liable to Pay Advance Tax?
Those who have tax liabilities of INR 10,000 or more in a financial year, have to make advance tax payment. These includes the following:
Salaried Individuals: For salaried individuals, tax is deducted at source (TDS) by the employers while paying the salary. However, salaried individuals having income in addition to salary such as: interest income, rental income, and likewise that increases their tax liability over INR 10,000, should make the advance tax payment.
Self-employed Professionals and Businesspersons: Assessees earning income from business or profession where TDS is not deducted must make advance tax payment if their total liability exceeds INR 10,000.
Freelancers: Freelancers having multiple sources of income and whose TDS is not deducted must make the advance tax payment if their tax liability exceeds the threshold.
Individuals with Capital Gains: Individuals earning from capital gains are liable for advance tax payment when the tax liability exceeds the threshold.
Individuals earnings from Investments: Earnings from dividends, interest on securities, mutual funds, make individuals liable for the advance tax payment if total tax liability exceeds the threshold.
Advance Tax: Exceptions for Payment
Certain taxpayers fall under the exceptions for making the advance tax payment which includes:
Senior Citizens: Individuals at the age of 60 years and above, who do not have income from business or profession are not required to make advance tax payment.
Salaried Individuals: Salaried individuals not having any other sources of income apart from salary are exempt from making advance tax payment.
Taxpayers Opting for Presumptive Taxation Scheme: Small business owners and professionals who have opted for the presumptive taxation scheme under Section 44AD, 44ADA, or 44AE are exempt from making advance tax payment for the incomes covered under the said sections. However, for incomes other than those not covered under the presumptive taxation scheme and having a tax liability in excess of INR 10,000, advance tax payment would be required.
Benefits of Paying Advance Tax
There are several benefits of making an advance tax payment. Few are listed below:
Improved Cash Flow Management: Since the advance tax payment is spread throughout the year, the taxpayers will be able to manage their cash flows effectively.
Reduces Interest Liability: Timely discharge of advance tax liabilities will help avoid interest charges under Section 234B and 234C for late payment or non-payment.
Ensures Compliance: Making advance tax payment on time shows the compliance with tax laws, thereby the penalties for non-compliance are avoided.
Avoids Last-Minute Rush: Taxpayers can avoid last minute rush by estimating the tax liability in advance making timely advance tax payments. This also avoids the year-end rush for tax payments.
Helps in Better Financial Planning: Knowing the tax liabilities well in advance helps the taxpayers to plan their investments and financial decisions accordingly.
Facilitates Smooth Processing of Refunds: When taxpayers overestimate the tax liability and pay more advance tax, the excess amount is refunded by the Income Tax Department. This is possible only because of the timely compliance with the advance tax payment.
Peace of Mind: Regular and timely payments ensure peace of mind, since the tax obligations are met on time.
Convenience: Since the advance tax payment can be made online, the process is more convenient and saves a lot of time. Thus, allowing taxpayers to fulfill the tax obligations from anywhere.
Advance Tax Payment Due Dates: FY 2024-2025
The due dates for making the advance tax payment for the FY 2024-2025 is as follows:
The percentages show the cumulative total tax liability expected to be paid throughout the financial year on the due dates.
Advance Tax Online Payment: A Step-by-Step Process
Making an online advance tax payment is an easy and convenient process, supported by the Indian Income Tax Department. The payment can be made using any of the two options: without logging into the Income Tax portal or after logging into the Income Tax portal. Following steps should be applied for making an online advance tax payment:
Option A: Without logging into the Income Tax Portal:
Using this option the advance tax payment can be done by following the below steps:
1. Visit the Income Tax e-filing portal at www.incometax.gov.in and select ‘e-Pay Tax’ under ‘Quick Links’ option.
2. Fill in the PAN details, complete the OTP verification with the registered mobile number and click on ‘Continue’.
3. A success message with PAN and name will appear on the screen. Click on the ‘Continue’ button.
4. Select Proceed under the option ‘Income Tax’.
5. Choose the Assessment Year as 2025-2026 and type of payment (minor head) as ‘Advance Tax (100)’ and click on the ‘Continue’ button.
6. Fill all the details of tax payment accurately according to the categories and click on ‘Continue’.
7. Choose the mode of payment whether Net Banking/Debit Card/Payment Gateway from the various options given under the online payment and click on ‘Continue’.
8. Preview and verify the details and click on the ‘Pay Now’ option to make the payment or edit the details, if need be and verify the details again and click on ‘Pay Now’.
9. After reviewing the terms and conditions, check the box and click the ‘Submit to Bank’ button to make the payment. You will be redirected to the appropriate webpage based on the payment mode selected.
10. Upon successful completion of the payment, the Challan Form Number (CRN) will be generated. Save the CRN for future reference purposes.
Option B: After logging into the Income Tax Portal:
After logging into the Income Tax Portal, follow the below steps for making the advance tax payment:
1. Visit the Income Tax e-filing portal at www.incometax.gov.in and login into the same using the e-filing login credentials.
2. On the dashboard, navigate to ‘e-File’ option and choose ‘e-Pay Tax’.
3. On the ‘e-Pay Tax’ page, select the ‘New Payment’ option to begin with the online tax payment.
4. Select the ‘Income Tax’ option and click on ‘Proceed’.
5. Follow the instructions as provided in Option A from Step 5 to Step 10 to proceed with the online tax payment.
Note: After successful payment, a confirmation will be sent over the e-Mail ID and mobile number.
Consequence of Non-Payment of Advance Tax
Not paying the advance tax can lead to various penalties and interest charges. Following are the consequences of non-payment of advance tax:
Interest on Delayed Payment: The immediate consequence of not paying the advance tax or delaying it beyond the due date is the levy of interest under Section 234B and 234C of the Income Tax Act.
Section 234B: If the 90% of the tax liability is not discharged by the end of the financial year, interest at the rate of 1% per month or part thereof will be levied.
Section 234C: If advance tax payments are not in accordance with the specified installments or the amount paid is less than the required percentage of total liability, interest under Section 234C will be levied.
Penalty for Underestimating the Tax: If the Income Tax Department concludes that the taxes are underestimated due to which advance tax is short paid, a penalty may be imposed in addition to the interest charges. This is a common approach where the discrepancy is huge and is an indicator of an improper evasion or incorrect financial disclosure.
Increased Scrutiny and Audits: Non-compliance with advance tax provisions at frequent intervals or making significant discrepancies in tax payments, can increase the chances of taxpayers for being scrutinized by tax authorities. This may also call for detailed audits, requiring taxpayers to submit extensive documentation and explanations for discrepancies.
Impact on Credit Score and Loan Eligibility: Financial institutions may access the records of the tax payments while evaluating the loan or credit applications, a consistent non-compliance with tax provisions can affect the credit score. This in turn, affects the loan eligibility and interest rates.
Legal Consequences: If the non-payment of advance tax is clubbed with other types of tax evasion, the taxpayer will also face legal consequences. This may lead to fines, penalties, or imprisonment based on the severity of the non-compliance.
Complying with Advance Tax Provisions
The consequences of not paying the advance tax can be avoided by following the below suggestions:
Timely Payments: To avoid interest charges, the advance tax payment must be made within the due dates.
Accurate Calculations: An online advance tax calculator can be used for determining the tax liability and making the payments. TaxBuddy also offers a calculator for determining advance tax.
Regular Review: The taxpayer should review the tax liability periodically, if there is a change in income and accordingly adjust the advance tax payments.
Seek Professional Advice: If you are unsure about the tax obligations or calculations, consult the tax expert to ensure compliance. Online platforms such as TaxBuddy also offer support for complying with the advance tax provisions.
Advance Tax Calculation: An Example
Let’s take an example for advance tax calculation. Suppose Priya is a freelance graphic designer for FY 2024-2025. Here is a breakdown of her financial estimates:
Annual Gross Receipts: INR 18,00,000
Estimated Expenses: INR 9,00,000
Investment in ELSS (Equity Linked Saving Scheme): INR 50,000
Paid towards LIC Premium: INR 20,000
Medical Insurance Premium: INR 15,000
Estimated TDS on Certain Receipts: INR 25,000
Interest Income from Savings: INR 5,000
Using the above details, let’s compute Priya’s advance tax liability:
Assuming the applicable tax rates for FY 2024-2025 and considering Priya falls under the tax slab of 20%:
Calculation of advance tax payments, with advance tax liability of INR 1,39,000 of Priya, her installment payments would be:
The example above demonstrates how freelancers like Priya can estimate the advance tax liabilities by accounting for their income, expenses and eligible deductions, ensuring that they meet the tax payment deadlines efficiently.
FAQ
Q1. What is an advance tax?
Advance tax refers to the payment of annual income tax in advance in installments instead of making a lump sum payment at the end of year. It is applicable where the tax liability of the taxpayer is more than INR 10,000 in a financial year.
Q2. Who should pay advance tax?
All individuals whose tax liability is more than INR 10,000 in a financial year after considering the TDS must pay advance tax. This includes salaried individuals, freelancers, businessmen, and corporate entities as well.
Q3. How to calculate advance tax?
Advance tax is calculated based on the estimated income for the year. To compute the advance tax, include all the incomes, deduct eligible expenses, and determine tax on the net income at the rates applicable after considering deductions and rebates.
Q4. What are the due dates for paying advance tax?
For individuals, following are the due dates for paying advance tax:
15th June: 15% of tax liability
15th September: 45% of tax liability, cumulative
15th December: 75% of tax liability, cumulative
15th December: 100% of tax liability, cumulative
Q5. Can advance tax payments be revised?
Yes. The advance tax payments can be revised if more or less tax has been paid based on the revised income estimates.
Q6. What is the consequence if advance tax payment deadlines have been missed?
In case the advance tax deadline is missed, the due amount can be paid in the next installment. However, the interest under Section 234B and 234C will become applicable for late payments.
Q7. How to make the payment for the advance tax?
Advance tax can be paid online through the Income Tax Department’s e-filing portal or at the designated banks using Challan 280.
Q8. Do senior citizens have to pay advance tax?
Senior citizens, that is, individuals who are 60 years of age or older and who do not have income from business or profession do not have to pay advance tax.
Q9. What if the income is overestimated and more advance tax is paid?
If the taxpayer overestimates the income and pays a higher advance tax, the excess amount will be refunded to the taxpayer by the Income Tax Department after the ITR is being filed.
Q10. Are there any benefits of paying advance tax?
Paying advance tax helps in managing the cash flows in a better way by spreading the tax payments throughout the year. This also prevents the last minute rush and interest penalties.
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