Understanding Taxes

What is Advance Tax?

Advance Tax is part payment of one’s tax liability before the end of the fiscal year, on 31st March. The provisions of the Income Tax Act make it obligatory for every individual, self-employed professional, businessman and corporate to pay Advance Tax, on any income on which TDS is not paid. So how much Advance Tax does one pay and what are its deadline? Investment Yogi explains it all.


Who Needs To Pay Advance Tax?

image Advance Tax is to be paid on income which has not been subject to tax deduction at source, and where the tax liability is over and above Rs. 10,000 in a financial year. The tax that is calculated is paid in three or four instalments depending upon the category the assessee belongs to. All individuals, corporate, self employed professionals, small scale businesses and HUF come under the purview of Advance Tax.


For individuals with employer salary as the sole source of income, Advance Tax would not be applicable as tax deducted at source would be taken care of by the employer. In case of other sources of income of an individual assessee, such as, income from capital gains, shares and mutual funds, lottery jackpot, income from house property, etc… Advance Tax is mandatory if the tax liability exceeds the stipulated amount of Rs. 10,000, in a single financial year.


Steps to Calculate Advance Tax

While calculating Advance Tax payable, assessee needs to make only a projection or estimate of his income, as the actual income could be calculated only by the fiscal year end.


Ø Using the projected income for the fiscal year, the tax payable is to be calculated as per the tax slabs applicable for the current financial year.

Ø From the tax so computed, subtract the tax deducted at source.

Ø Include surcharge and educational cess while calculating advance tax.

Ø The amount arrived at is the advance tax payable, in instalments.


Deadlines for Advance Tax

The Income Tax Regulations have extended certain deadlines for payment of Advance Tax.


Ø For Corporate Entities


Net Payable

By 15 June

Up to 15% of estimated tax payable

By 15 September

Up to 45% of estimated tax payable

By 15 December

Up to 75% of estimated tax payable

By 15 March

100% Tax


Ø For Non Corporate Entities


Net Payable

By 15 September

Up to 30% of Estimated tax payable

By 15 December

Up to 60% of Estimated Tax payable

By 15 March

100% Tax


Penalties for Non Payment of Advance Tax

If you have failed to pay your Advance Tax or, if you have paid less than the stipulated percentage, you would be liable to pay a penal interest amount. This interest is calculated at 1% simple interest per month on the defaulted amount for three months. The interest penalty would continue up to the next deadline. If even after the last deadline of 15 March, the tax is not paid, then the 1% would be on the defaulted amount for every month, until the tax is fully paid.


In case the last day for payment of any instalment is a holiday, the payment can be made on the next working day. In such a case, penal interest would not be applicable for the delay.


In Case of Excess Advance Tax Paid

In case the Advance Tax paid is a higher amount than the actual tax liability, then the excess amount is refunded back to the assessee. Also an interest of 6% on the excess amount is paid, if, the excess amount is 10% more than the actual tax.


Where to Pay Advance Tax

Advance Tax could be paid using a Tax Payment Challan at designated branches of banks empanelled with the Income Tax Department. Branches of ICICI, HDFC and SBI accept Advance Tax Payment Challans. Alternatively, individuals could pay Advance Tax online through the Income Tax Dept / NSDL website. https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp and use CHALLAN NO. /ITNS 280


You can e-file your tax returns online in few simple clicks at www.taxyogi.com


Written by Ramya Ramachandran


Income Tax Calculator


Published Jun 18 2011




Ashish Gupta said:

What if you didn't pay Advance tax before last date? I am a salaried employee but changed job last fiscal. Hence some how my TDS didn't cover full tax liability and now I realized - after doing tax calculation for refund - that I owe tax. Software automatically added the penal interest as well. Can I pay advace tax now and file refund after? Will above link work for that?

June 19, 2011 11:44 PM

Anubuthi agarwal said:


   i have a capital gain on sale of land in feb.2011,& i forget to deposit advance tax then what will be interest treatment for this.

September 14, 2011 6:01 AM

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