Advance Tax – Who Should Pay and When?

What is Advance Tax?

We earn income during the previous year, but we furnish the details related to income and taxes after completing the previous year. However, it is required to pay the tax in the previous year itself instead of the assessment year for a certain category of taxpayers. Such tax paid during the previous year is called advance tax.

In other words, advance tax refers to the payment of income tax in instalments during the financial year instead of paying the entire amount at the end of the year.

Who is required to pay advance tax?

Any person whose tax liability for the year is more than Rs. 10,000 is required to pay advance tax.

Who is not required to pay advance tax?

o   Advance tax is not payable by a resident senior citizen or super senior citizen who does not have business income.

o   Any assessee whose tax liability does not exceed Rs. 10,000.

When to pay advance tax?

Advance tax is paid in instalments during the previous year. The due dates are as under:

Taxpayer Type All types of taxpayers (other than those who opted for the presumptive taxation scheme) Taxpayers who opted for the presumptive taxation scheme under sections 44AD and 44ADA
By 15th June Upto 15% of advance tax NIL
By 15th September Upto 45% of advance tax NIL
By 15th December Upto 75% of advance tax NIL
By 15th March Upto 100% of advance tax Upto 100% of advance tax

Consequences of not paying advance tax

Interest under sections 234B and 234C shall be levied if the payment of advance tax is not made, short paid, or not paid as per the instalments mentioned above.

Not paying advance tax may lead to cash flow issues for the taxpayer as they will have to pay a large amount of tax at the end of the financial year. This may affect their ability to invest or save money.