Advance Tax

What is Advance Tax?

We are all aware that individuals are liable to pay tax online to the government if their income falls under the income tax bracket. Therefore, for the government of India as well, the collection of taxes is very significant for the economy. Advanced tax, as the name implies, is when you pay your income tax in advance before the due date. An advance tax is a smart way to handle your taxes and keep your finances in check throughout the year, instead of paying a lump-sum amount at once. When you do so, this is called advanced tax. Please note that advance tax is paid in the year in which the individual earns that income. That's why it is also known as the "pay as you earn scheme."

Who is liable to pay advance tax?

As per Section 208 of the Income Tax Act 1961, whenever any taxpayer's income tax amount is Rs. 10,000 or higher, a requirement for advance tax arises. generally, anyone expecting a sizable tax bill should be on the hook for advance tax. The advance tax applies to all taxpayers, salaried individuals, freelancers, and businesses. Only those exempt from paying advance tax are senior citizens over the age of 60 and do not have any income from business or profession.

Due Dates of Advance Tax Instalments

Keeping track of advance tax due dates is key to smooth financial planning.  you need to clear at least 15% of your tax liability by June 15, 45% by September 15, 75% by December 15, and 100% by March 15.

How to Calculate Advance Tax?

Calculating advance tax isn’t a headache. With a few straightforward steps, you can get it sorted and keep your finances on track. Here’s a simple guide to help you navigate the process:

1. Estimate your total income from all sources earned from 1st April- 31st March of the financial year for which you are doing the advance tax calculations for tax filing online.
2. Subtract all eligible deductions and exemptions.
3. Compute tax on such income as per the tax regime you opted for.
4. Reduce the amount of tax paid by way of TDS/TCS.

What are the Benefits of Advance Tax?

Paying advance tax might not sound like the most exciting topic, but it comes with some pretty great perks for both you and the government. Here’s why embracing advance tax can be a game-changer:

• It lightens the load of paying taxes all at once at the end of the year.
• It eases the stress that taxpayers might feel when facing a large tax bill at fiscal year-end.
• It prevents taxpayers from missing their tax payments.
• It supports government revenue, as the government earns interest on the advance tax collected.