What is advance tax and who are liable to pay advance tax?

written by Income tax Expert | October 14, 2019

As the name suggest any payment of tax made during the financial year for that financial year itself is known as advance tax. Therefore if you are paying any tax for FY 2019-2020 from 01.04.2019 to 31.3.2020 it will be termed as advance tax for F.Y. 2019-20 and any tax after 01.04.2020 will be self assessment tax for F.Y. 2019-2020. If you wish to pay advance tax during the financial year you need to select minor head 100 in Challan No. 280 and select the correct Assessment year.

Now let’s understand who are liable to pay advance tax:

Each and every person whose tax liability during the year is above ₹ 10,000 (as per Section 208 of Income Tax Act) he needs to pay advance tax. This tax liability needs to be checked after taking the credit of TDS/TCS available during the year (as per clause d of sub-section 1 of section 209 of the Income Tax act).

The provisions of Advance tax won’t apply to a resident aged 60 years or above if he doesn’t have any income under the head Income from Business and profession.

What are the benefits of paying the advance tax?

As we all know we are always short of money therefore if we form a habit to pay advance tax in time we don’t have to worry about, how would we pay such a big amount in once after March as we have already paid it in small installments during the year.

Second benefit of paying advance tax is it will save a minimum of 5% of interest on advance tax even if you pay the tax in April 2020 and if you pay tax while filing Income tax return it could save your 8-9% interest which is a huge amount if you have earned any capital gain income or something like that.

 

Below mentioned are the due dates for paying advance tax. Do keep your calculation ready and pay proper advance tax:

 

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

We’ll talk about interest on non payment of advance tax i.e. 234B and 234C in some other post along with interest u/s 234A.

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