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Introduction:

The advance tax payment system entails paying income tax in advance, throughout the year in installments, rather than settling the entire tax liability in a lump sum at the end of the financial year. Familiarizing yourself with the rules and regulations surrounding this advance tax payment is essential.

Here, you will find detailed information about advance tax filing, including eligibility, tax calculation methods, online filing methods, due dates, penalties and taxation requirements.

Advance Tax Payments: 

The process of paying income tax in advance, encompassing additional revenues, instead of settling the dues at the end of the financial year, is termed as advance tax payment. Both individuals and businesses can opt for advance income tax payment if their estimated income tax liability exceeds or equals ₹ 10,000 after accounting for TDS (Tax Deducted at Source).

Taxpayers have to calculate their income and calculate their tax liability based on the Income Tax Act 1961 applicable to them. In such cases, no accounts or income statements should be filed with the tax authorities. Four installments of the tax can then be paid in advance in a given financial year, and the due dates are announced by the Tax Office.

Who is Required to Pay  Advance Tax :

• If one’s income tax exceeds Rs. 10,000 in a financial year must be taxed in advance. This obligation applies to salaried and self-employed individuals, including freelancers. However, citizens age 60 or older who are unemployed are exempt from paying advance taxes.
• Professionals like architects, lawyers and doctors come under the presumptive tax regime of Section 44ADA. One installment of advance tax must be paid on or before 15 March, although payments are also allowed up to 31 March.
• Individuals who have opted for presumptive arrangements under section 44AD are required to pay one installment of advance tax on or before 15 March, and the other by 31 March.

Benefits of Advance Tax:

• It improves financial management for businesses and aids in calculating total income for the year.
• It reduces the risk of tax default.
• It increases government revenue while collecting interest on accumulated funds.
• Promotes financial discipline among taxpayers by mitigating stress associated with fund shortages or last-minute tax payments.

Guide to Paying Advance Tax Online:

As per Rule 125 of the Income Tax Rules, 1962, corporate taxpayers (i.e. companies) are required to pay tax electronically through the internet banking system of authorized banks 

You can conveniently pay your advance tax online through the payment portal of the Income Tax Department. Just follow the steps below.

Step 1: Visit  official website of TIN-NSDL.

Step 2: Select “e-payment” from the ‘Services’ section.

Step 3: Select the appropriate challan  for tax (in this case select Advance Tax).

Step 4: Fill in the required form information, including your bank name, email ID, phone number, address and year of assessment. Then, enter the CAPTCHA code.

Step 5: Your screen will now display the net banking page of your bank. Double-check the tax rates shown on this page.

Calculation of Advance Taxes : 

Taxpayers can determine their advance taxes liability by following the steps outlined below:

• First, taxpayers must make a complete return of their “income” to calculate their taxes. This calculation should include income from various sources such as capital income, interest, rent income, business income, and so on.
• Total taxable income is then calculated by adding salary income to estimated source income for the year. It is important not to pay advance tax on salary alone. The salary component affects the tax base and increases the tax liability.
• Determine your tax liability by referring to the latest income tax schedule that applies to you.
• Deduct the TDS amount that will be withheld for various earnings.
• If the tax payable exceeds INR 10,000 after deduction of TDS, follow the instructions for advance tax payment.

Refund in Advance Tax Payment:

The IT Act prescribes four days for any installment of advance tax to be paid at any given time. If you have paid excess tax in advance, you will be eligible for a refund under Section 237 of the Income Tax Act. Further, under Section 244A, if the tax payable exceeds 10%, the excess amount will accrue interest at 6% per annum.

Final Word:

Advance tax provisions offer benefits to both taxpayers and the government. By collecting tax in installments, it alleviates the stress of lump-sum payments for taxpayers and accelerates government revenue. However, it’s essential to have a thorough understanding of the various sections of the Income Tax Act before filing tax returns.