Advance Tax: 5 Smart Things You Should Know About Advance Tax

Before getting into the meat of it all, it is very important to know the meaning of advance tax. As the very name suggests, advance tax is the paying of the taxes before the end of the current financial year. It is also called ‘pay-as-you-earn’.

Technically put, advance tax is the amount of income tax payable if an individual’s tax liability is more than Rs. 10,000 in a specific financial year. Therefore, it must be paid in the year in which the income is received.

Can Anybody Pay Advance Tax?

The answer is a clear no. There are certain conditions that have to be met for paying advance tax:

  • There is a term called Tax at Source, that is, if one is a salaried employee, he or she cannot pay advance tax as the amount is already deducted by the concerned employer.
  • Another very important thing to note is that advance tax is payable if an individual has income sources other than his salary. Advance tax is payable if he or she has income through capital gains, winning lottery tickets, capital gains on real estate properties etc.
  • So far as self-employed professionals and businessmen are concerned, they too have to shell out advance tax as the liabilities are considerably huge.
  • An important notification: advance tax must be paid on the 15th of September, December, and March, so far as employees are concerned. Companies need to pay it on the 15th of June, September, December, and March.
  • What if he or she somehow misses the notified deadline? In that case, a specific interest will have to be paid. The amount is calculated at 1% simple interest per month on the defaulted amount for a period of three months.
  • Another important thing to note is that in case the advance tax is paid higher than needed, then the concerned assessee will receive the redundant amount as a refund.

Read About: How to save tax on your interest income

Do Senior Citizens Have to Pay Advance Tax?

So far as senior citizens of the country are concerned, there are certain important norms. According to the Section 207 of the Income Tax Act of India, a resident senior citizen (anyone above the age of sixty years) who do not have any source of income from any profession or business is not responsible to Pay Advance Tax. No matter he or she may have various sources of income from pension schemes and otherwise, these do not fall into the category of ‘income from business or profession’. Therefore, advance tax need not be paid by them.

What If An Individual Has Source of Income Other Than His Salary?

It is a very important clause for concern. In that case, a salaried individual need not fret. As mentioned earlier, there is the universal concept of TDS. So the concerned employee should declare his or her foreign earnings to the employer and ask for TDS to be put to apply accordingly.  The concerned advance tax can be paid using tax payment challans at any bank branch. The said branch must be authorized by the income-tax department.

How To Calculate Advance Tax?

  • First of all, the concerned individual must avail of the form 26AS. One must remember to take down the TDS for the whole year while filling the form.
  • So far as step 2 is concerned, incomes on which TDS is not deducted are to be considered. The said incomes are not shown on the form 26AS. The previous year incomes also are to be taken into account while filling the form.
  • The investments of the concerned assessee are to be seen to compute the deductions under sections 80C and 80G.
  • Once the total amount of the specific income is correctly projected, the tax rates as applicable in the financial year are to be applied for. Also, the particular amount of advance tax needs to be projected.

How Important Is It To Pay Advance Tax?

This is a very patent question among the concerned taxpayers. The fact is that the government chiefly counts on the overall tax collections to fund its various schemes throughout the year. So it is very likely to cause havoc if taxpayers were to clear taxes only at the brink of the year. Therefore, advance tax ensures a steady flow of revenue to the exchequer throughout the year. Advance tax can also be filled in separate installments. In fact, it is easier and always advisable to split up the amount into installments instead of puking the whole tax amount during the moment of filing the specified returns. Therefore, advance tax is a very important concept so far as constant government funding is concerned which, in the end, is equally important for the country.

Read About: Here’s Why You should be Efiling Income Tax

Recent Blog

Leave a Reply

Your email address will not be published.