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Advance Tax

Advance tax is referred to the tax paid in advance which will be payable on the total income of one’s earning within a financial year (by calculating the total income from various sources such as salary, business earning, professional income, rent income etc). Advance tax is usually expected to be cleared before the financial year ends. Advance tax can be explained in a simplified term as, ‘pay as you earn’ policy, meaning it is payable if your tax liability exceeds Rupees 10,000 in a financial year.

Advance tax paying timeline for 2016-17

Due Date Installment Payable
On or before 15th June At least 15% of advance tax must be paid.
On or before 15th September At least 45% of advance tax must be paid.
On or before 15th December At least 75% of advance tax must be paid.
On or before 15th March The whole amount (100%) of advance tax must be paid

If anyone who is liable to pay advance tax, does not pay it within the specified timeline then 1% interest per month will be applied on the total amount of tax.

To pay advance tax:

What are the steps for Payment of Advance Tax Online?

Advance Tax can be paid online via the official Income Tax Department website. The following steps must be followed to successfully complete the payment procedure.

  • Visit the official website of the Income Tax Department.
  • On the home page select individual or HUF option.
  • Select Advance Tax filing form, which is Challan 280.
  • Fill the form with all the correct credentials, including details of the assessment year, address, phone number, email address, the name of your bank account, captcha code etc.
  • After filling and submitting the form, the applicant will be redirected to the Bank’s Net Banking page for verifying the transaction. Always recheck the amount for the payment to be made.
  • Once the amount of the payment has been deducted from the bank account the details along with your challan number will be sent to you.
  • Make a report of your payment by adding an additional entry under the ‘paid tax’ page.
Sources of Income that Attract Advance Tax

Following are the types of income which require an individual to pay for Advance Tax:

  • Income from capital gains on shares.
  • Interest from fixed deposits.
  • Winnings from a lottery.
  • Income from renting of house/flats.
Calculating Payment of Advance Tax

To determine if one should pay Advance Tax, you can calculate your earnings as follows:

  • Income Calculation: Apart from the salary, calculate all the income you earn, including any agreements in progress which could be added to your earnings in the future.
  • Deduct the Expenses: Deduct all the expenditures, associated with the rent of your business office, travel expenses, internet and phone bill charges etc. from the total income.
  • Combine the rest of the Income: After deducting the expenditure amount from the total income, deduct the same percentage of TDS that was deducted from your salary.
  • Total Advance Tax: Upon calculation, if the TDS on your income shows more than Rupees 10,000 then you will have to pay Advance Tax.

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