03 Mar The Ultimate Guide to Advance Tax: Calculation, Deadlines & Payment!

Advance tax is the income tax you pay in advance for the financial year instead of paying it in a lump sum at year-end. This ensures that taxpayers contribute to government revenues periodically based on their earnings.

Who Needs to Pay Advance Tax?

Advance tax applies to:
✔️ Business owners & freelancers with taxable income exceeding ₹10,000 after TDS deductions.
✔️ Salaried employees with additional income from rent, capital gains, interest, or business.
✔️ Companies & professionals earning profits where TDS doesn’t cover full tax liability.

Why is it Important?

Failing to pay advance tax on time results in penalties under Sections 234B and 234C of the Income Tax Act, 1961:

• Section 234B: If at least 90% of the total tax liability is not paid by March 31, 1% interest per month is charged on the unpaid amount.
• Section 234C: If tax installments are not paid on time, 1% interest per month is applied for late payments.

How to Calculate Advance Tax?

Follow this simple formula:
(Estimated Total Tax Liability – TDS Already Deducted) = Advance Tax Payable

Steps to Calculate:

1️⃣ Estimate Your Total Income – Include all sources like business profits, salary, rent, capital gains, and other earnings.
2️⃣ Compute Tax Liability – Apply the applicable income tax rates for the financial year.
3️⃣ Deduct TDS Already Paid – Subtract any tax already deducted at source.
4️⃣ Pay the Remaining Tax as Advance Tax – If the amount exceeds ₹10,000, you must pay it before the deadline.

Advance Tax Payment Schedule for each Financial Year

How to Pay Advance Tax?

You can pay advance tax online or offline:

✅ Online Payment via E-Filing Portal:

• Visit the Income Tax Portal.
• Log in using your PAN and password.
• Navigate to e-Pay Tax under the e-File menu.
• Click on New Payment and select Advance Tax (Minor Head 100).
• Enter assessment year, payment details, and tax amount.
• Choose a payment mode (Net banking, Debit/Credit card, UPI, etc.).
• Complete the payment and download the challan receipt for records.

✅ Offline Payment:

• Visit an authorized bank branch.
• Fill out Challan 280 and make the payment.
• Collect the receipt and keep it for future reference.

Consequences of Missing the Deadline

Interest Penalties: Late payment leads to 1% monthly interest on unpaid tax.
Cash Flow Issues: Higher year-end tax burden disrupts business planning.
Tax Notices: Non-compliance can lead to scrutiny and penalties from tax authorities.

Paying advance tax on time is a smart financial move that helps businesses avoid penalties, maintain cash flow, and stay compliant with tax regulations. With the March 15 deadline approaching, ensure you calculate and pay your tax dues in advance.

Need help with your advance tax calculation and payment? Contact Fiscora Solutions today for hassle-free tax compliance!