Advance tax is the amount of income tax that is paid much in advance rather than as lump sum payment at the year end. Also known as earn tax, advance tax is to be paid in installments as per the due dates decided by the income tax department.

How advance tax is calculated?

Here is how the advance tax to be paid is arrived at:

Income Tax on Estimated Total Income
- Relief under section 87A
= Income tax after relief u/s 87A
+ Surcharge on the Estimated Income
= Tax Liability
+ Education cess
= Total tax liability
- Relief other than relief u/s 87A
= Advance Tax Liability

Why Advance Tax is Important?

Advance Tax the income tax paid in advance for the income earned in a particular financial year. Normally, the tax is to be paid when the income is earned but under the tax provisions of advance tax, the payer has to actually estimate the income for the entire year and based on this estimate the tax is paid at specific time intervals. Here it is important that the tax payer estimate the income and then calculate the estimated tax on it to check whether he or she needs to pay the advance tax and how much.

Who should pay Advance Tax?

As per section 208 of Income Tax Act 1961, every person whose estimated tax liability for the year is more than or equal to `10,000 is liable to pay advance tax.

Those who are excluded from paying advance tax are senior citizens who are above the age of 60, not having any income from business or profession.

What are the important dates in Advance Tax?

Advance tax varies with the due dates. For FY 2017-18, the advance tax to be paid by individual as well as corporate assessees are as follows:

  Due Date Advance Tax Payable
1. On or before 15th June 15%
2. On or before 15th September 45%
3. On or before 15th December 75%
4. On or before 15th March 100%

What forms are required in Advance Tax?

The form that is required to be duly filed on the prescribed due dates is Challan No. ITNS 280. Pre-requisites of ChallanNo. ITNS 280 are:

  • PAN Details: Carefully publish correct PAN details or else your tax can be deposited in someone else’s name.
  • Assessment Year: Select the correct assessment year for which the tax is to be paid as it is going out in advance for the upcoming financial year.
  • Selecting type of payment: The taxpayer has to select the type of payment in the form. If the tax is being paid for the same financial year on the basis of the estimated income- it would be advance tax whereas if the tax is being paid after the end of the financial year – it would be self assessment tax.

After the payment is done, a Challan Identification Number (CIN) will be provided. You are required to keep a note of the same and use this CIN while filing for income tax return. Also, verify once whether the online payment made through ITNS 280 is received by the IT department.


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