Have you paid your Advance Tax?

What happens when you miss to pay Advance Tax?

Advance Tax is a mechanism under which taxpayers are eligible to pay income tax in advance if the income tax liability is INR 10,000 or more. Advance Tax is to be paid quarterly in regular installments on or before the due dates specified by the Income Tax Department.

Who is eligible to pay advance tax?

All taxpayers whose total income tax liability exceeds INR 10,000/- during the year are eligible to pay advance tax.

  • For salaried employees, TDS is generally deducted on a monthly basis by their employers and hence they need not pay advance tax. However, incase they have income from other sources, rental income, income from capital gains – their tax outflow increases and under such circumstances it becomes mandatory for them to pay advance tax.
  • In case of taxpayers earning income on presumptive basis, they are required to pay advance tax only in towards the March installment;
  • Senior Citizens not earning income from business or profession are exempt from paying advance tax.

Advance Tax slabs

What happens if Advance Tax is not paid?

Non – payment of advance tax or short payment of advance tax attracts interest under s. 234B and 234C of the Income Tax Act.

Interest under s. 234B

Interest under s. 234B is imposed when –

  • Total tax liability for the year exceeds INR 10,000/- and advance tax has not been paid OR
  • Advance tax has been paid is less than 90% of ‘advance tax’

Interest @ 1% is calculated on assessed tax less advance tax already paid. Assessed Tax means total tax computed on income as reduced by TDS.

Interest under s. 234C

Interest under s. 234C becomes applicable when advance tax has not been paid as per the percentage due on installments.

Interest for persons opting for presumptive taxation shall be computed if advance tax paid on or before 15th March is less than 100% of the required sum.

Interest for other taxpayers is calculated as under :

  • If the taxpayer pays advance tax on or before 15th June, it is less than 12%;
  • If the taxpayer pays advance tax on or before 15th September, it is less than 36%;
  • If the taxpayer pays advance tax on or before 15th December, it is less than 75%;
  • If the taxpayer pays advance tax on or before 15th March, it is less than 100%

If payment of advance tax has not been made as per the prescribed due dates, taxes should be paid at the earliest in order to minimize the penal interest. Taxes paid after 15th March but before 31st March are also considered as advance tax.

Have you paid your Advance Tax?