What is Advance Tax ? Due Date for Advance Tax Payment is 15th March 2024

 

The income tax return (ITR) filing season often brings stress for many taxpayers, owing to the substantial time and effort needed to gather all the necessary information, arrange it systematically, and subsequently complete the return form and the burden of huge tax liabilities to be paid. However, an effective strategy can help alleviate some of this burden - advance tax payment online.

Advance tax is a method of tax collection that allows taxpayers to pay their tax liabilities in installments throughout the financial year rather than in a single lump sum payment. This approach eases the financial strain and simplifies the ITR filing process. Let us read more below.

The due date for the fourth and last installment of advance tax( FY 2023-24) is 15th March 2024.

What is Advance Tax?

Advance tax, also known as "pay as you earn" tax, is a system where taxpayers make prepayments of their income tax throughout the financial year instead of paying a lump sum at year-end. It is mandated when the anticipated tax liability for the year exceeds a certain threshold, typically specified in tax regulations. This ensures a steady flow of revenue for the government and helps taxpayers manage their tax obligations effectively.

Individuals with an estimated tax liability exceeding Rs. 10,000 in a financial year are generally required to pay advance tax. However, there's an exception to this rule: if you're a senior citizen aged above 60 and don't have any business income, you are exempt from making advance tax payments.

Who is not liable to pay Advance Tax?

While many taxpayers are required to pay advance tax, there are specific groups of individuals and entities who are not liable to pay advance tax. These include:

• Tax Relief for Senior Citizens:
  Individuals aged 60 years or above, without income from business or profession, are exempt from paying advance tax.
• Income below Taxable Limit:
  Taxpayers with total income not exceeding the taxable limit are not required to pay advance tax.
• Presumptive Taxation Scheme for Businesses:
  Small businesses with an annual turnover of up to Rs. 2 crores can opt for the presumptive taxation scheme and are exempt from advance tax.
• Farmers and Agriculturists:
  Income from agricultural activities is not considered for advance tax calculation, providing relief to farmers and agriculturists.
• Commission or Brokerage Income:
  Individuals earning income through commission or brokerage are exempt from paying advance tax on such earnings.
• Income Covered under Section 44ADA:
  Professionals with specified income covered under Section 44ADA, such as certain professionals in the field of medicine, law, engineering, etc., are exempt from advance tax.
• Individuals with Business Income under Presumptive Taxation:
  Individuals having business income covered under presumptive taxation provisions are not required to pay advance tax separately on such income.
• Capital Gains:
  Taxpayers with income from capital gains are exempt from paying advance tax if they choose to pay the entire tax liability at the time of filing their income tax return.
• Salary Income:
  Salaried individuals are generally not required to pay advance tax as their employers deduct tax at source (TDS) from their salary.
• Dividend Income:
  Individuals receiving dividend income are not subject to advance tax on such earnings.

Advance Tax Due Date & Amount

Starting from the financial year 2016-17, both corporate and individual taxpayers have been treated equally when it comes to the due dates and the percentages of advance tax they need to pay.

Due date of Advance Tax Payment for both individual and corporate taxpayers

Advance Tax Due Date	Amount of advance tax
On or before June 15	Up to 15% of advance tax liability
On or before September 15	45% of advance tax less advance tax already paid
On or before December 15	75% of advance tax less advance tax already paid
On or before March 15	100% of advance tax less advance tax already paid

Benefits of Paying Advance Tax

• The tax collection process speeds up.
• Defaulting tax payment chances are reduced.
• Increase in government funds as the government receives interest on the collected amount.
• From the government's perspective, it provides a continuous flow of income throughout the year.
• Taxpayers need not worry about the shortage of money or tax payments at the last moment or at the time of filing an Income Tax return.

Refund in Advance Tax Payment

Advance tax refers to paying a portion of your taxes before the end of the financial year. This is typically done in installments throughout the year, based on estimated income, to avoid a large tax liability at the end of the year. If you've paid more in advance tax than what you actually owe at the end of the financial year, you may be eligible for a refund. Taxpayers can claim a refund by filling out and submitting Form 30. They have to make the claim within a period of one year from the last year of the assessment year.