Advance tax is referred to the tax payable on the total income of one’s earning within a year; by calculating the total income from different sources like salary, business, profession, rent, etc. Advance tax is always expected to be cleared before the end of the financial year. Advance tax can also be simplified as, ‘pay as you earn’ policy which is payable if your tax liability exceeds Rupees 10,000 in a financial year.
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The income that government receives through Advance Tax helps to maintain a consistent flow of revenue throughout the year. Through Advance tax revenue, the government can incur any expenses at the given time instead of piling on a liability of dues.
For salaried individuals, there will be no requirement to file for Advance Tax as the employers implement TDS policy, which means a deduction of taxes from total salary at the source. If the individual has other sources of income other than his/her salary then Advance Tax becomes applicable which indicates that this tax is payable even for salaried employees with extra earnings.
Besides earning from regular business or income from salary, if an assesse earns his/her income through the capital profits on shares, interest on fixed deposits, winnings from lottery or races, house property etc. then, after regulating the losses and gains, Advance Tax must be paid.
TDS is deducted on salaries by the empoyers but, advance tax is paid on the type of income that is not subjected to TDS. Entrepreneurs, corporations and self-employed individuals must pay taxes in advance because once the taxes start piling then it becomes a liability which is hard to remove.
There are certain types of income which require an individual to pay for Advance Tax
To determine if you should pay Advance Tax, you can calculate your earnings as follows
The payments for Advance tax or self-assessment taxes must be done during the 15th of September, December and March. Payment must be made in installments of 30%, 30% and 40% respectively for non-corporations. Corporations are required to make the payments on the 15th of June, September, December and March.
The payment of Advance Tax can be made online via the Income Tax Department website.
The following steps need to be followed to successfully complete the payment procedure
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An individual is required to pay an interest amount if he/she forgets to pay the Advance Tax by the first deadline. 1% interest on the defaulted amount is computed as the interest rate for every month until the tax is paid off in full. If the individual still doesn’t pay the tax by the second or third deadline, the same interest penalty will be re-applicable (1% interest).
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Some of the obvious advantages of Advance Tax payment system are
After the assessment, at the end of the year, if The Income Tax Department finds out that the amount paid for Advance Tax is more than the amount imposed then the excess amount is refunded to the payee. To claim for refund, the taxpayer must fill and submit Form 30 within a period of one year, from the last assessment year.
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Cases that do not require the payment of Advances Taxes include
The Economic Times Wealth: Vikas Dahiya, founder and chief of tax compliance platform, All India ITR announced a free of cost tax returns solution for members of the Indian Armed Forces. Due to their disciplined schedules, annual tax returns become a hectic chore for servicemen. They need to repaid for their services to millions of citizens and this initiative will go a long way to alleviate the stresses in their service conditions.
18th July 2017
THE ECONOMIC TIMES
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