Advance Tax Payment for Individuals

Anumeha Singh
Aug 25, 2017 · 4 min read

Income tax remains a gruesome subject for many and a fair share of people fail to understand what exactly Advance tax is. Resultantly, they fail to file their advance taxes and left out in a lurch with a huge tax liability on their shoulders. This is the reason why we have decided to shed more light on the subject here.

Advance tax is the total tax liability of a tax payer on his/her total earnings from various sources that included, but is not limited to, salary, business, rental income, etc. This tax is required to be cleared off before the end of a given financial year.

Also popular called ‘Pay as you earn’ scheme, Advance tax is obligatory to be paid by an individual if the total earnings for that individual exceeds Rs.10,000 in a given financial year. Income tax department of India stipulated that the Advance tax is paid in the same year in which one earns the income.

Now, let’s check out who is liable to pay advance tax.

Who is Liable for Advance Taxes?

Those earning income only from salary are not required to pay advance tax as their taxes are already deducted by their employers as TDS (tax deducted at source). Advance tax is liable to be paid by those earning income from sources other than salary. Here is a list of income sources that are taken into consideration for advance tax liability.

* Income from capital gains on shares

* Interest from fixed deposits

* Income from lottery winnings

* Income from rent or house property

How Can You Pay Advance Tax?

It is easy to make payments for Advance Taxes. All one needs to do is to fill out advance tax Challans at banks that are authorized by the Income Tax Department of India. Alternatively, net savvy tax payers can directly deposit their advance taxes online through income tax of India’s official website or through the National Securities Depository.

Okay! You know who needs to pay advance taxes and how to pay for it. Now it’s time to understand how to calculate Advance Tax liability.

How to Calculate Advance Tax?

It is Easy to Calculation of your Advance Tax Payment, liability and an individual can calculate the advance tax himself/herself without having to burn midnight oil or to spend through their nose consulting a chartered accountant. Check out the easy steps below to understand how advance taxes are calculated.

  1. First Step: The very first step is to calculate the total income from the aforementioned sources. Also add any upcoming income from sources other than your salary.
  2. Second Step: Now deduct your total expenditure from your total income calculated in the first step. You can deduct expenses incurred on upkeep, travel, phone bills, etc.
  3. Third Step: Add any other income that you may earn in the form of interest pay-outs, rental income, etc. Now, calculate the TDS deducted from your salary by your employer.
  4. Fourth Step: Now if the total amount exceed Rs.10,000 then you are liable to pay advance taxes.

What if You Get Late in Making Advance Tax Payments?

This is a normal scenario, people often get late in making their advance tax payment. This is because of the unawareness about it. But this mistake may really cost dearly to the advance tax payers. Late payment of advance taxes, later than the first deadline, may attract penalties in the form of interest. The interest is calculated as 1% of the total tax liability payable each month until the tax is paid off completely. If you get to miss the second and the third deadline too, the same interest penalty would apply.

Who is Exempt from Advance Tax Liability?

Any one above the age of sixty years (senior citizens) is exempt from advance tax liabilities provided they do not run or own any business in their name. In addition, tax payers who have signed up for presumptive schemes are not liable to pay any advance taxes. Remember, presumptive schemes are available for businesses with an annual turnover of more than Rs.2 cr in any given financial year. Presumptive schemes are also available for doctors, lawyers and architects with annual income equal to or more than Rs.50 lakhs.

How to Claim Advance Tax Refund?

If you have paid more than what was required for your advance taxes, you may claim a return by filling and submitting Form 30. Remember, it is important to make a claim within one year from the last year of the assessment year.

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Hi, i am Anumeha Singh. A Insurance adviser for Life Insurance, Term Insurance, Child Insurance, Investment Plans and Tax Saving.

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