Advance Tax
Advance tax is the amount of income tax that is paid much in advance rather than a 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 is advance tax 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 |
| + SHEC |
| = Total Tax Liability |
| - Relief other than relief u/s 87A |
| - TDS |
| = Advance Tax Liability |
Why is advance tax important?
Advance tax is the income tax paid in advance for the income earned in a particular financial year. Usually, the tax is to be paid when the income is earned. Still, under the tax provisions of advance tax, the payer has to 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 estimates the income and then calculates 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 the 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 an 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% |
Which forms are required in advance tax?
Challan No. ITNS 280 is the form that needs to be duly filed on the prescribed due dates. Pre-requisites of Challan No. ITNS 280 are:
- PAN Details: Carefully publish correct PAN details, or else your tax will 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 the 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 based on the estimated income- it would be advance tax. If the tax is being paid after the end of the financial year – it would be self-assessment tax.
After the payment is made, 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 IT department has received the online payment made through ITNS 280.
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