Advance Payment of Income Tax

Unlike other mandatory taxes in India, Advance Payment of Income Tax is made necessary under certain laws. Advance tax in the country is a system designed to allow a taxpayer to pay the applicable income tax in installments to the government before the end date of the financial year.

An individual can pay his/her advance tax on time generally before the end of the financial year. The advance tax payments in India can be done in four different installments in the financial year. This option provides you with the facility to pay the first installment due on or before 15th June. You can pay the second installment on or before 15th September and the third installment on or before 15th December. The fourth installment can be made on or before 15th March. For the people failing to pay the advance tax, there is a provision of 1% monthly interest.

Who is required to pay advance tax?

Every Indian citizen under section 208, whose tentative tax liability is Rs. 10,000 or more for the year, shall pay his/her tax in advance, in the form of “Advance Tax”.

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Advantages of Paying On-time Advance Tax

Paying advance tax on time has multiple benefits. Firstly, it helps you avoid penalties for late payments, which can be a significant expense. Additionally, paying advance tax allows for better cash flow management by spreading payments out over the year, making it more manageable. Paying taxes on time can also help reduce overall tax liability by allowing you to take advantage of available deductions and exemptions.

By avoiding interest charges on outstanding tax amounts, you can save money in the long run. Paying taxes on time is a sign of financial responsibility. It can help you improve your credit rating, which can be beneficial if you need to apply for credit or varied types of loans in the future.

How is the advance tax calculated?

There is a predefined step to be followed to calculate the exact advance tax. Do not forget that late advance tax payments or underpayment can attract interest or penalty charges. The estimated income and liability of tax for the financial year help you calculate the payable advance tax.

Following the below steps can be useful in advance tax calculation:

  • Estimate the total income for the financial year
  • Deduct applicable deductions that include investments made under Section 80C, 80D, 80G, etc.
  • Calculate the tax liability
  • Deduct TDS and other credits
  • Calculate the advance tax

For instance,

If a person in India has a net tax liability estimated at Rs. 2,40,000 in a financial year and has claimed the TDS of Rs. 40,000, the net advance tax liability is Rs. 2,00,000. The advance tax payment can be done by him in four equal installments of Rs. 50,000 each.

I.e. 200000/4 = Rs. 50,000/-

Remember, you are also eligible for a refund if you happen to make any excess payment as advance tax. There is a penalty also for failing to pay on time the estimated advance tax.

How to Pay Advance Tax Online?

You can pay advance tax online by following a few simple steps.

Below are the steps for you:
  • Visit the dedicated Income Tax Department website
  • Look for the e-payment facility on the website
  • Choose the form meant for the Advance Tax payment
  • Select the right Advance Tax code
  • Enter the required details including PAN, contact number, name, address, e-mail address, etc.
  • Submit the form after filling in the necessary details

If you face inconveniences or difficulty in paying Advance Tax Online anytime, you can choose Valcus for dependable tax compliance and other services.

Under certain provisions, there is an exemption allowed from the advance tax payment available to an Indian resident who is 60 years or above. It is also for the senior citizens not having chargeable income to tax under the “Profits and gains of business or profession” head.

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Frequently Asked Questions

March 15 is the last date for payment of the last Advance Tax installment for the financial year 2022-2023.

A taxpayer is eligible to claim a refund of the excess advance tax paid by him.

Under section 234B, there is a penalty interest levied for default in advance tax payment at 1% simple interest per month or part of a month. The penalty interest levied is on the unpaid advance tax amount of money.

There is a facility to pay advance tax manually. For the same, you can visit the authorized bank branch. Inquire for the applicable tax payment challan form - Challan 280. Fill in the essential details demanded in the form. Submit the filled-in Challan 280 form along with the payable money.

The payment of advance tax can be done in 4 installments. For the four advance tax installments, the prescheduled date includes the 15th of June, 15th of September, 15th of December, and 15th of March.

Paying advance tax on time has several advantages such as avoiding penalties, better cash flow management, reducing tax liability, avoiding interest charges, and improving credit rating. These advantages can help you save money, manage your finances better, and improve your overall financial situation.

Valcus has a professional team expert in tax compliance and can assist you with advance tax payments.

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