Are you someone who prefers to pay their bills and payments well before they’re due? Do you also meticulously plan your finances for the year ahead? If you answered yes to either of these questions, you would be happy to know that you can also pay your taxes in advance.
But how does it work? Well, you simply pay an advance tax. However, the key difference here is that advance tax is paid in installments rather than a lump sum amount. Plus, the dates for these payments are decided by the Income Tax Department.
Although advance tax is a great way to stick to your financial goals, it is also an excellent option for those who can’t always churn out a lump sum amount at the end of each financial year. All in all, it’s a great alternative to paying your taxes the traditional way.
So, if you wish to know more about what is advance tax and how to pay advance tax online, make sure you keep reading!
- Advance tax is a type of tax that is paid in installments and not in a lump sum amount at the end of the fiscal year.
- Only individuals and corporate assesses that have an income besides salaries are liable to pay advance tax.
- You can pay advance tax only if your tax liability is equal to more than INR 10 thousand.
- Senior citizens over the age of 60 who don’t earn salaries don’t have to pay advance tax.
- The due date for advance tax installments and the tax rates are decided by the Income Tax Department.
- Advance tax can be paid online and offline.
Know the Ins and Outs of What is Advance Tax
As the name implies, advance tax is simply a tax you pay in advance, and it is also known as the ‘pay as you earn’ tax. Instead of paying a lump sum amount, you pay the tax in installments on the dates fixed by the Income Tax Department of India. Plus, advance taxes are paid during the same year you earn your income and not at the end of the financial year.
But can everyone pay advance taxes? Well, no. Advance taxes can only be paid by individuals (including self-employed professionals, freelancers, businesspersons, and corporate assesses) who have an income source besides their salary.
For instance, if you earn an income by renting out a property, winning the lottery, or through capital gains on stock market shares, you can pay an advance tax. However, your tax liability should be over or equal to INR 10 thousand for you to be able to pay advance tax. Additionally, senior citizens over the age of 60 who don’t earn an income through business or employment are exempt from paying advance tax.
Also, as we mentioned, the due dates for advance tax installments are decided by the Income Tax Department. However, the schedule and slab rates slightly differ for individuals and corporate assesses. Let’s take a look:
Advance Tax Schedule for Businesspersons and Self-Employed Individuals
|Date of Installment ||Payable Advance Tax|
|On or before 15th September||30%|
|On or before 15th December||60%|
|On or before 15th March||100%|
Advance Tax Schedule for Corporate Assesses (Excluding those covered under Section 44AD)
|Date of Installment ||Payable Advance Tax|
|On or before 15th June||15%|
|On or before 15th September||45%|
|On or before 15th December||75%|
|On or before 15th March||100%|
Now that you know what is advance tax let’s understand how to pay advance tax online.
Committed to Taxes? Learn How to Pay Advance Tax Online
While having the option to pay your taxes well in advance is good enough, the online payment facility for advance tax is like the cherry on the cake. Even better, it’s quick, easy, and hassle-free, and all you need to do is follow these steps:
Visit https://www.tin-nsdl.com/ on your browser.
Look for ‘Services’ on the homepage and select ‘E-Payment: Pay Taxes Online’ from the drop-down menu.
Select ‘Challan 280’ and ‘100 Advance Tax’ from the options listed next to it.
Carefully fill in your personal details like PAN card number, address, phone number, email ID, and bank details.
Enter the security/captcha code and click on ‘Proceed’.
You will now be redirected to your bank’s payment page, and you can pay through debit card or net banking.
Once the payment is successful, you will receive a receipt containing all the essential information, including the challan serial number.
Make sure you save a copy of the receipt by downloading it or taking a snapshot, as you will need it while filing your ITR.
As you can see, the steps for how to pay advance tax online are quite simple. However, you can also pay advance tax offline by visiting an authorized bank, some of which are:
|Reserve Bank of India (RBI)|
|State Bank of India (SBI)|
|Punjab National Bank (PNB)|
While the process is the same, you have to submit a cheque or pay in cash to complete the payment. Plus, you should remember to take a copy of the receipt from the bank.
Should You Pay Advance Tax? Know the Benefits of Paying Advance Tax
As you’re now familiar with how to pay advance tax online (and offline), let’s go through the benefits of paying advance tax:
- No Last-Minute Stress
If you pay an advance tax, you won’t have to worry about missing the deadline or not having enough money to pay the amount in a lump sum. Additionally, you can avoid the last-minute stress as you’ll be done with your tax payment well before others. All in all, advance tax is good for your peace of mind.
- Hassle-Free Tax Collections
Most of us always crib about tax payments being a tedious task. But have you ever thought about how the Income Tax Department manages tax collections? Well, let’s just say that it isn’t as easy or simple. However, if individuals or corporate assesses pay advance tax, the tax collection process becomes comparatively easier and hassle-free.
- Better Financial Management
As we mentioned earlier, advance tax is also known as the ‘pay as you earn’ tax. This means that you pay your taxes as you earn instead of waiting till the end of the fiscal year. Not only does this help you avoid defaulting payments, but it also aids in better finance management. Plus, this way, you can keep a better track of your income and expenses.
Are You Liable? Know the Eligibility Criteria for Paying Advance Tax
Although the option to pay advance tax is a great initiative on the IT department’s part, you should check if you meet the eligibility criteria, which are:
- You should be a citizen of India.
- You should be a self-employed individual or a salaried individual.
- Your tax liability should be equal to or over INR 10 thousand.
- If the earnings are received through capital gains on stock market shares.
- If the income is earned by renting out a house property.
- If the amount is a result of lottery winnings.
- If the income is earned via interest on fixed deposits (FDs).
While this sums up the eligibility criteria for paying advance tax, you should know that if you are a senior citizen and don’t have an income (from employment or business), you don’t have to pay advance tax.
Did You Know?
In 2020, the Indian government collected close to INR 14 trillion from taxes on income and property. Additionally, in 2021, this figure was projected to cross INR 15 trillion.
How to Calculate Advance Tax?
If you plan on paying advance tax, you should be thorough with your calculations so as to avoid any mishaps. But if you don’t know how to calculate advance tax, here’s how:
Make an estimation of the total income you earned (besides your salary) during the fiscal year for which you wish to pay advance tax. Here are the incomes you need to evaluate:
- Capital gains
- Income earned on interest from savings accounts or FDs
- Rental income
- Lottery winnings
Now add the yearly income from your salary, which will give you the gross taxable earnings.
Calculate the payable advance tax as per the slab rate applicable to you. Ensure that the slab rate is for the same fiscal year.
Lastly, subtract the Tax Deducted at Source (TDS) from the total sum, whether or not it has been already deducted.
If the total amount rounds off to INR 10 thousand or more, you are liable to pay advance tax. For instance, if your total tax liability for the fiscal year 2021-22 is INR 1 lakh, you will have to pay an advance tax of:
- INR 15 thousand by June 15th
- INR 45 thousand by September 15th
- INR 15 thousand by December 15th
- INR 25 thousand by March 15th
However, you should know that the slab rate will vary according to the payment date and the tax amount. Also, it’s best to pay advance tax on time to avoid penalties.
Word to Remember
Tax Deducted at Source (TDS)
Tax Deducted at Source or TDS is the amount of tax deducted from your salary by your employer. However, you can claim a TDS refund while filing your ITR.
So, that covers everything you should know about what is advance tax and how it works in India. However, you should remember that advance tax is only payable on the income that you earn apart from your salary or business earnings. Plus, it is best to ensure that you meet the eligibility criterion before you proceed to make the payment.
If you are a Non-Resident Indian (NRI) who has a tax liability of INR 10,000 or more, you are liable to pay advance tax.
If you pay advance tax online, you can choose to pay via debit card or net banking. However, if you prefer to pay advance tax offline, you will have to submit a cheque or pay in cash.
Yes, you will have to pay the penalty if you fail to pay advance tax on time. This provision is stated under sections 234B and 234C of the Income Tax Act.
Yes, you can claim deductions under Section 80C of the Income Tax Act of India while calculating advance tax.
If you are a senior citizen with no salaried income, you are not liable to pay advance tax.
Also Read: Toll Tax in India