Blog > How and when should you pay your Advance Taxes.

How and when should you pay your Advance Taxes.

by Team MMR | 22 November 2013

If your tax liability exceeds Rs 10,000/- for the current financial year, then you are obligated to pay advance tax. As the name says, it is tax paid as you go on earning as opposed to paying tax in lump sum amount at the end of the financial year. Individuals can pay advance tax thrice, while businesses can do the same four times within the span of one financial year.

 The following table shows the rates and dates if advance tax payment :

 Individuals/Non-corporate assesses

Percent of Advance Tax Liability payable

Date on or before which Tax must be Paid

30 %

15th September

60 %

15th December

100 %

15th March

 

 Corporate Assesses/Businesses 

Percent of Advance Tax Liability payable

Date on or before which Tax must be Paid

15 %

15th June

45 %

15th September

75 %

15th December

100 %

15th March

 

Advance Tax Liability

Remember, advance tax liability is calculated only on income received wherein the tax was not deducted at the source. Hence most salaried people don’t have to worry about paying advance tax. However, a person’s income often includes income from renting out a property and such other capital gains too.

Some people work on temporary project or contract basis wherein the tax is often not deducted at source. Advance tax liability applied on such kind of income. Please note that paying advance tax basically means to estimate the yearly earnings and paying the stated percentage of it by the due date.

 

Penalty on Failure to Pay Advance Tax

The penalty is often referred to as interest cost as well. Whether you’re an individual or a business concern, penalty on failing to pay the advance tax is 1% simple interest on the defaulted amount for every month until the tax is paid off fully. So it is important to not only abide by the dates but also by the required percentage of total tax liability.

 Paying this form of tax is personal responsibility since a person or a firm only knows their earnings the best. The tax department can assess properly only at the end of the financial year.

 

 But I’m paying more than necessary!

Your total income tax may be less than what you pay via advance tax. This is also common with tax deducted at the source. But returns can be filed for at the end of the year for the same.

The Indian Income Tax department remits the excess of the tax paid + 6% interest per annum on the excess amount to the assesse. This also underlines the importance of filing returns.

 

How to pay Advance Tax? 

  1. Online payment
  2. ITNS 280 challan – can be filled and submitted at the designated bank branches that accept advance tax payment. The RBI recently designated 29 banks including public and private sector banks for collecting advance tax.

 Of course, it is good sense to avoid waiting until the last month or due dates to file this tax to skip the rush and save time. Computing advance tax can be done via online calculators, CAs, tax consultants, etc. Makemyreturns.com will also help you with paying advance taxes.

About the author: Vikram Ramchand is the founder and CEO of Make my Returns. Connect with him via Google+.

Tax Saving Tips