What is advance tax?
Advance tax is the tax you estimate on the income earned by you during a particular financial year.
Such payments are made in advance in four quarterly instalments during the financial year. In case of any delay, you will have to pay a penal interest.
How to calculate your advance tax liability?
You can compute your advance tax liability by following these steps:
Step 1: Add up all the income estimates for the year, like salary income, house rent, income from business or profession, capital gains, crypto income, interest from banks and FDs, lottery winnings, etc.
However, one cannot estimate the exact capital gains in advance. Hence, if a taxpayer has any capital gains after the advance tax payment due dates, such tax liability can be paid in the remaining instalments.
Step 2: Deduct the tax-saving expenses or investments from that amount, such as LIC or medical insurance premiums, contribution to PPF, interest on education loans, and further on.
Step 3: Now calculate your income tax liability basis the applicable tax rate and a cess of 4%.
Step 4: Reduce the TDS or TCS (including the expected TDS/TCS) amount from the tax liability.
Step 5: If the balance tax liability exceeds Rs. 10,000, you must pay advance tax.
Pay 15% of the advance tax liability computed above by 15th June 2022 – the due date for payment of the first instalment.
Note: Senior citizens of age 60 years or more, who do not run a business, are not required to pay advance tax.
People opting for the presumptive taxation scheme under sections 44AD and 44ADA are required to pay advance tax in a single instalment by 15th March 2023.
Like always, ClearTax is here to your rescue if this computation seems like a task. To compute your advance tax liability in minutes, you can use this tool https://cleartax.in/paytax/advancetaxcalculator.
How to make advance tax payment online?
Steps to pay advance tax online
Step 1: Visit https://www.tin-nsdl.com/services/oltas/e-pay.html.
Step 2: Select “CHALLAN NO./ITNS 280” and click on proceed.
Step 3: Enter the following details: “Tax Applicable”, “Type of Payment” (Select 100- Advance Tax), “Mode of Payment”, “PAN”,”‘ Assessment Year” (2022-23), and other personal details.
Step 5: Once you complete the payment, you’ll get a tax receipt with the payment details. On the right side of the challan, you can see the BSR code and challan serial number.
Important: Take a screenshot of the tax receipt or save a copy for future reference. You will need the BSR code and challan number for return filing.
For any clarifications/feedback on the topic, please contact the writer at sujaini.biswas@clear.in
An Editor by day and a sloth by night…I would love to eat and sleep throughout the day if given a chance…I enjoy reading and love my job and my team at ClearTax.
