BAJAJ BROKING
July 25, 2024
8 mins read
In this article, we will discuss how advance tax works. We will find out who needs to pay advance tax, and when. Then we move on to how to calculate the advance tax liability, how to pay it, and all about exemptions and refunds as well. We also touch upon the key benefits of paying advance tax.
Advance tax payment might sound complicated, but it’s actually simple—you pay your taxes before the financial year ends. Think of it like paying for a meal before eating, except there’s no immediate return unless you’ve overpaid. In that case, you’ll get a refund later. But first, let’s break down the basics.
Advance tax is the system of paying income tax in parts before the financial year ends, rather than as a lump sum later. If your advance tax payment exceeds ₹10,000, you must follow advance tax due dates to avoid penalties. Delays can lead to advance tax late payment Interest. To stay compliant, understand how to pay advance tax and easily pay advance tax online through the e-filing portal. Timely payments help manage your advance tax Liability without last-minute stress.
Understanding how to pay advance tax and choosing to pay advance tax online helps taxpayers avoid penalties like advance tax late payment interest.
For the financial year 2025-26, taxpayers must pay advance tax in installments instead of a lump sum to avoid penalties. The schedule ensures payments are spread throughout the year, helping manage tax obligations smoothly.
The table below shows the percentage of advance tax that must be paid by each due date to meet tax obligations.
Due Date | Payment Percentage |
By 15th June | 15% of the total tax due |
By 15th September | 45% of the total tax due, after deducting previous payments |
By 15th December | 75% of the total tax due, after deducting previous payments |
By 15th March | 100% of the total tax due, after deducting previous payments |
Due Date | Advance Tax Payment Percentage |
By 15th March | 100% of the total tax due |
Staying on track with advance tax due dates prevents interest charges on late payments.
Taxpayers can pay advance tax online through the Income Tax Department’s e-filing portal. Following the correct steps ensures timely advance tax payment and helps avoid penalties for missed Advance Tax Due Dates.
Following these steps helps taxpayers comply with advance tax due dates and avoid advance tax late payment interest. Understanding how to pay advance tax and using the e-filing portal ensures a smooth advance tax payment process.
Missing an advance tax payment deadline can lead to additional interest charges under tax laws. These penalties apply when taxes are either not paid on time or paid in insufficient amounts, making it essential to follow advance tax due dates to avoid unnecessary costs.
If at least 90% of the total advance tax liability is not settled by 31st March, an interest charge of 1% per month is applied until the remaining amount is fully paid.
Situation | Interest Rate | Duration | Basis of Interest Calculation |
When payment made by 15th June is less than 15% of total tax | 1% per month | 3 months | 15% of due amount (-) tax already deposited |
When payment made by 15th September is under 45% of total tax | 1% per month | 3 months | 45% of due amount (-) tax already deposited |
When payment made by 15th December is under 75% of total tax | 1% per month | 3 months | 75% of due amount (-) tax already deposited |
When payment made by 15th March is under 100% of total tax | 1% per month | 1 month | 100% of due amount (-) tax already deposited |
To avoid these charges, taxpayers should plan their advance tax payment carefully.
Properly computing advance tax payment ensures compliance with advance tax due dates and helps avoid penalties. Follow these steps to determine your advance tax liability:
Step 1: Calculate total income for the financial year, including earnings from salary, business profits, capital gains, rental income, and interest from savings or investments.
Step 2: Deduct eligible exemptions and deductions under provisions like Section 80C (investments in PPF, ELSS), Section 80D (health insurance premiums), and other applicable tax benefits to determine taxable income.
Step 3: Apply the latest tax slab rates to compute the total tax owed for the financial year.
Step 4: Account for any advance deductions such as TDS, ensuring that previously withheld tax is adjusted against the total liability.
If the net payable tax is above ₹10,000, taxpayers must deposit advance tax in installments. To streamline payments, use the e-filing system to pay advance tax online and avoid penalties like advance tax late payment interest.
To illustrate how advance tax payment works, let’s take an example. Rohan, a self-employed consultant, expects to earn ₹22,00,000 in FY 2025-26. His estimated business expenses are ₹13,00,000. He also contributes ₹50,000 to a PPF account, pays ₹30,000 in LIC premiums, and spends ₹15,000 on health insurance. A TDS of ₹35,000 is deducted from his professional income, and he earns ₹12,000 from fixed deposit interest. His advance tax liability is calculated as follows:
Category | Amount (₹) | Net Taxable (₹) |
Business Income | 22,00,000 |
|
Less: Expenses | 13,00,000 | 9,00,000 |
Other Income |
|
|
Interest from Fixed Deposit | 12,000 |
|
Total Earnings |
| 9,12,000 |
Applicable Deductions |
|
|
PPF Contribution (80C) | 50,000 |
|
LIC Premium (80C) | 30,000 |
|
Health Insurance (80D) | 15,000 |
|
Total Deductions |
| 95,000 |
Taxable Amount |
| 8,17,000 |
Calculated Tax |
| 67,000 |
Education Cess (4%) |
| 2,680 |
Total Tax Obligation |
| 69,680 |
Less: TDS Deducted |
| 35,000 |
Remaining Tax Due (Payable in Advance) |
| 34,680 |
Due Date | Installment Percentage | Amount to Be Paid (₹) |
15th June | 15% of total amount | 5,200 |
15th September | 45% cumulative | 10,400 (15,600 - 5,200) |
15th December | 75% cumulative | 10,400 (26,000 - 15,600) |
15th March | Full amount settled | 8,680 (34,680 - 26,000) |
To avoid a large tax burden at the end of the financial year, advance tax payment is made in scheduled installments. These payments align with advance tax due dates and are based on estimated earnings.
Once the financial year concludes, the final tax liability is determined by adjusting for advance tax, Tax Deducted at Source (TDS), and Tax Collected at Source (TCS). If the total tax paid exceeds the required amount, the excess is refunded. If there’s a shortfall, the outstanding amount must be settled.
Taxpayers can use the e-filing portal to pay advance tax online, ensuring timely compliance and preventing advance tax late payment interest. As mentioned already, knowing how to pay advance tax helps in managing obligations efficiently.
Paying advance tax on time is a crucial part of tax compliance, ensuring that individuals and businesses meet their obligations without facing last-minute financial pressure. By following the advance tax due dates, taxpayers can distribute their payments across the financial year and avoid penalties under sections 234B and 234C. Whether you are a salaried individual with additional income, a freelancer, or a business owner, understanding how to pay advance tax helps prevent unnecessary interest charges. Using the e-filing portal to pay advance tax online makes the process seamless and ensures accurate record-keeping. Planning ahead and calculating your advance tax liability correctly allows for a smoother tax filing experience and helps avoid unexpected tax dues at the end of the year.
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The status of your advance tax payment can be checked by visiting the e-filing portal and log in. Navigate to ‘e-Pay Tax’ and access the payment history. Ensure the transaction reflects under the correct assessment year. Always verify the details to confirm successful processing of your advance tax payment.
Yes, you can pay advance tax at authorized bank branches. Fill out tax challan ITNS 280, provide the necessary details, and complete payment at the bank. Alternatively, taxpayers can also pay advance tax online through the e-filing portal for convenience and quicker processing.
If advance tax payment exceeds the total advance tax liability, the excess amount is refunded. The Income Tax Department processes refunds automatically. Taxpayers may check refund status through the e-filing portal. Timely filings ensure faster refunds for any overpaid advance tax payment.
Individuals above 60 years without business income are not required to pay advance tax. However, if they earn through business, they must make an advance tax payment as per prescribed advance tax due dates. This exemption applies only to non-business senior citizens.
Yes, you can still pay advance tax after the due date, but interest under advance tax late payment interest rules applies. Delayed payments attract penalties under Sections 234B and 234C. Use the e-filing portal to pay advance tax online and avoid additional charges.
Yes, failing to pay advance tax results in penalties under Sections 234B and 234C. Interest charges apply if advance tax payment is below 90% of total liability by 31st March. Taxpayers can pay advance tax online to avoid unnecessary penalties.
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