Receiving income in advance is such a joy, but paying expenses in advance is a relief. Don’t you agree? Similarly, paying advance tax relieves you from incurring further expenses in the form of interest on the late payment of advance tax.
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Advance tax is the tax paid in advance for the income of a particular financial year. You might be under the impression that tax has to be paid only once when you earn it. But this is not true. The Income Tax Department requires advance tax to be paid based on the estimated income for the entire year. Also, advance tax is paid at specific time intervals throughout the financial year.
1) Advance tax is payable if your tax liability exceeds Rs 10,000 in a financial year.
2) It should be paid in the year in which the income is received.
3) It is payable on income not subject to TDS.
4) It is known as 'pay-as-you-earn' scheme.
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2. Advance Tax Means
Calculating advance tax may seem a tedious job. Contrastingly, it is a boon. Paying advance tax is important and beneficial in the following ways:
3. When to pay advance tax?
The dates for paying advance tax are given by the Income Tax Department as follows:
1) Individuals, corporate taxpayers, and taxpayers who have opted for presumptive taxation:
2) For tax payers having business income:
4. Penalties attracted for non-payment of advance tax
Failure or partial payment of advance tax attracts stiff penalties as follows:
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5. Excess advance tax paid
If the advance tax paid by you is higher than the total tax liability, you will receive the excess amount as a refund. Also, interest @ 6% per annum will be paid by the Income Tax department on the excess amount if it is more than 10% of tax liability.
6. Who should pay advance tax?
You need to pay advance tax if:
1) You earn income other than salary. This is because your employer deducts tax at source (TDS) for salary.
2) You earn income not subject to TDS.
7. Senior citizen advance tax exemption
A senior citizen aged 60 years or more who is a resident Indian and does not run a business is exempt from paying advance tax. Be Wise, Get Rich.
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