Advance Tax Deadline Approaches

The last day for paying the last and final instalment of Advance Tax is just a day away, now is a good time to learn what advance tax is all about. To start with, advance tax is essentially an advance estimation of the aggregate income tax payable by the individual for the particular financial year. These payments are made in instalments as per the preset dates provided by the tax authorities, hence earning itself the name “pay as you earn tax”.

Who has to pay Advance Tax?

Advance tax is applicable to the taxpayers with an income tax liability of Rs.10,000 or more in a particular FY. Advance tax provisions apply to all the taxpayers, freelancers and businesses. Individuals who are 60 years old or above and do not have any profits or gains from the business are exempted from paying advance tax.

How to calculate Advance Tax?

The advance tax payable can be calculated against the present income, estimated by the individual, as per the tax rates applicable for the particular financial year.

The amount of the advance tax payable is arrived after making adjustments for the tax deducted at source with the estimated income tax liability.

When to deposit advance tax?

The dates for depositing the advance tax for all the taxpayers are as follows:

As for businesses and professionals resident in India, who have a gross turnover less than Rs 2 crores for a year, can opt to pay presumptive income tax under section 44AD and 44ADA. These taxpayers are exempt from the mandatory payment in instalments of advance tax and are liable only to pay a lumpsum advance tax (100% of advance tax) only on March 15th. Such businesses don’t necessarily have to maintain books of accounts. Although, they are not allowed to deduct any expenses against this business income.

These are the essentials of advance tax. With March 15th just around the corner, do not wait any longer to pay your advance tax. If there is a failure to pay the advance tax on time, you will have to bear additional penalties for the same.