Advance Tax Payment: Meaning, Process, Due Dates & Deductions for AY 2023-24
Updated: Dec 17, 2023
Table of Content
Let us unfold the attributes of the answer to What is Advance Tax?
Introducing the concept of Advance tax:
It refers to the payment of taxes before the end of the financial year. If your tax liability exceeds Rs. 10,000, you are required to pay this tax. The payment can be made in installments on specific dates within the same year in which you earned your income. This system ensures a consistent inflow of revenue for the government throughout the year.
Making advance tax payments can be done conveniently through the Online tax payment website of the Income Tax Department or the National Securities Depository (Advance tax NSDL). These platforms streamline the process, allowing you to fulfill your tax obligations efficiently.
By adhering to the advance tax system, you contribute to the smooth functioning of the government's financial operations while ensuring compliance with tax regulations.
Navigating the Advance Tax Payment Process:
1) Access the Tax Information Network:
Visit the official tax information network of the income tax department and locate the option for Challan 280. Click on 'Proceed' to move forward.
2) Enter Personal Information and Payment Details:
In this step, you will provide your personal information and select the type of payment correctly. For individuals paying tax, choose (0021) Income Tax (Other than Companies). Then, select the appropriate type of payment based on your tax liability, such as Advance Tax, Surtax, Tax on Distributed Profit, Tax on Distributed Income, Self-Assessment Tax, or Tax on Regular Assessment. Additionally, select the desired mode of payment, either net banking or debit card. Enter the relevant assessment year (AY) and your complete address. Complete the step by entering the Captcha code and clicking on 'Proceed'.
3) Confirm and Submit the Payment Request:
Review the displayed information to ensure its accuracy. Once verified, submit the payment request to your selected bank. You will then be redirected to your bank's payment page to securely complete the transaction.
4) Here is where you will need to verify the receipt:
After successfully making the payment, you will receive a tax receipt on the subsequent screen. This receipt will provide you with important details, including the BSR code and challan serial number, located on the right side of the challan. Make sure to take note of this information for future reference and record-keeping purposes.
Let us look at the categories that cover who all must pay advance tax.
1) Independent professionals, including doctors, lawyers, architects, and others, who fall under the presumptive scheme outlined in section 44ADA, have a specific requirement for advance tax payment. They are obligated to pay the entirety of their advance tax liability in a single installment on or before the 15th of March. Alternatively, they have the flexibility to settle their entire tax dues by the 31st of March.
2) For taxpayers who have opted for the presumptive taxation scheme under section 44AD, a distinct provision governs their advance tax payment. They are required to pay the entire amount of their advance tax in one installment on or before the 15th of March. Additionally, they have the option to fulfill their tax obligations completely by the 31st of March.
3) Senior citizens, aged 60 years or older, who do not engage in business activities, are granted an exemption from advance tax payment. Therefore, only senior citizens who generate income from business sources are obliged to pay advance tax according to the applicable regulations.
4) Advance tax payment is a mandatory requirement for various types of taxpayers, including salaried individuals, freelancers, and businesses. If your total tax liability for a financial year equals or exceeds Rs 10,000, you are obligated to make advance tax payments. It is important to fulfill this obligation to comply with tax laws and avoid potential penalties or legal consequences.
Advance tax slab pertaining to the advance tax due dates AY 2023-24
To adhere to the advance tax regulations, you must make payments promptly. By 15 June or earlier, at least 15% of your tax liability should be paid. By 15 September, this amount increased to 45%, and by 15 December, it reaches 75%. The full payment is expected by 15 March.
The exact payable amount on each due date varies based on your taxpayer category. In case your income estimates change during the year, you have the flexibility to adjust the advance tax amount accordingly.
When determining the income tax on your estimated total income, there are various elements to take into account. Firstly, it is important to calculate any relief that may be applicable under section 87A, as this can help reduce your tax liability. Once this relief is applied, you will arrive at the income tax amount after considering the relief provided under section 87A.
Subsequently, it is necessary to factor in any surcharge that may be applicable based on your estimated income. This surcharge can potentially increase your tax liability. Adding the surcharge to the tax amount after relief under section 87A will give you the total tax liability.
In addition to the above, it is crucial to consider the education cess and the SHEC (Secondary and Higher Education Cess), as they form additional components of the tax. Including these in your calculations will provide you with the total tax liability.
Furthermore, it is worth noting that there may be other forms of relief available to you, apart from the relief under section 87A, which can further reduce your tax liability. Additionally, if you have any Tax Deducted at Source (TDS) applicable to your income, you can subtract this amount from your total tax liability.
By carefully considering these factors, you can accurately determine your advance tax liability for the year while ensuring compliance with tax regulations.
Deductions for Advance Tax NSDL:
To calculate your taxable income for the purpose of advance tax payment, it is essential to consider the deductions you wish to claim. Deductions under various sections such as 80C, 80D, 80E, or any other applicable sections should be taken into account.
These deductions help reduce your total income, thereby arriving at the taxable income that needs to be reported on your tax return. For more detailed information on deductions, refer to Sections 80C, 80CCC, and 80CCD.
In order to streamline the taxation process, the Income Tax (I-T) department has introduced a mandatory requirement to link your permanent account number (PAN) with your Aadhaar.
The earlier deadline of March 31 has been extended to June 30, 2023.
After July 1, failure to link your PAN with Aadhaar will result in your PAN becoming inoperative.
To link your PAN with Aadhaar, you can visit the National Securities Depository Limited (NSDL) portal. There, you will be required to make the necessary payment using Challan No. ITNS 280.
Upon missing on the deadline of 30th June, you can choose to link your PAN with Aadhaar by paying a fine of ₹1,000. It is noteworthy to note that the I-T department will not process your tax returns until your PAN and Aadhaar have gotten successfully linked.
Late Payment Interest on Advance Tax:
When taxpayers do not pay their quarterly estimated tax, they get charged an interest on advance tax. There are two key components to this interest:
Interest under Section 234B:
Taxpayers have to pay at least ninety percent (90%) of their taxes in advance by the closing of the financial year, which usually falls on March 31st, according to section 234B of the Income Tax Act. If there are any unpaid amounts, then he/she is charged one percent interest per month for failure to make these advance tax payments.
Interest under Section 234C:
The same is true for delayed advance tax paid under Section 234C; there are specific rates applicable within certain time limits for interest. The rate depends on a percentage of the advance tax, which is paid at several points within the financial year. It is calculated based on the default percentage minus the necessary percentage.
How to Make Online Advance Tax Payments:
Submitting advance tax online is very easy. Here are the steps to follow:
Visit the Income Tax Department, India Online e-Filing Homepage.
Click on the ‘e-Pay Tax’ option in the ‘Quick Links’ category on the left side of the homepage. Alternatively, you can search ‘e-Pay Tax’ on the portal’s search bar.
Enter your PAN, followed by re-submitting the same. Finally, enter the mobile number in the box below.
To continue, enter a 6-digit OTP sent to your mobile and click ‘Continue’.
Click on ‘Proceed’ having selected ‘Income Tax.’
Then select “Assessment Year” and “Type of Payment” (e.g., “Advance Tax (100)”), and press OK.
Make sure you enter all relevant tax information correctly.
Choose the payment you prefer, the bank of the transaction, and then click ‘continue’.
Refer to Challan Details, Click ‘Pay Now’; Edit details as required.
The following screening would provide feedback that the payment request has been processed. Note the BSR code and challan serial number indicated at the right part of the challan. In case anyone needs this tax receipt later on. You must enter the BSR code and challan number on the tax return form.
Example of Advance Tax Calculation:
To illustrate the advance tax calculation process, consider the case of Ajay, a freelancer in the interior decoration profession, for the fiscal year 2022-23:
Income Estimation for Advance Tax Amount (Rs)
Income from the profession:
Gross receipts 20,00,000
Less: Expenses 12,00,000
Income from profession 8,00,000
Income from other sources:
Interest from a fixed deposit of 10,000
Gross Total Income 8,10,000
Deduction under section 80C:
Contribution to PPF 40,000
LIC premium 25,000
Deduction under section 80C 65,000
Deduction under section 80D 12,000
Total Income 7,33,000
Tax Payable 59,100
Add: Education cess @ 4% 2,364
Tax Payable 61,464
Less: TDS 30,000
Tax Payable in Advance 31,464
Advance Tax Payments:
Due Date Advance Tax Payable Amount (Rs)
15th June 15% of Advance Tax 4,700
15th September 45% of Advance Tax 14,100
15th December 75% of Advance Tax 23,600
15th March 100% of Advance Tax 31,400
This advance tax calculation serves as a guide for taxpayers to estimate their liability and ensure timely payments to avoid interest charges and penalties.
Forms and Challan for Advance Tax Payment:
To meet your prepaid advance tax commitment, you must use challan no. Completing an accurate ITNS 280 form is required and must be sent within stated deadlines. When doing so, it is essential to adhere to the following prerequisites:
PAN Details: Provide your Permanent Account Number (PAN) accurately. Inaccuracy could lead to a deposit into an incorrect person’s account, complicating things.
Assessment Year: Be sure to choose the appropriate base taxation year. It should be stated that forwarding tax is for future periods.
Type of Payment: Make it clear on the form the type of payment you are making. Advance tax is any tax paid upon estimated income for that same financial year. On the other hand, when the tax payment follows after the end of the financial year, it constitutes a self-assessment tax.
Upon completing the payments, you receive a Challan Identification Number (CIN). You must keep this CIN since you will need it when filling in your income tax returns. It’s also important to check if online payment using ITNS 280 has been remitted to the Income Tax department.
Advance Tax for Senior Citizens:
As a senior citizen, you can subtract up to Rs. 50,000 in interest made from savings bank accounts, bank deposits, post office deposits, or cooperative banks under Section 80TTB.
However, there is no need for senior citizens who do not derive any proceeds from business/profession to make advance tax payments. Specifically, such an exemption saves this group of people, particularly the elderly, from paying taxes.
FAQs:
Q1. Do I need to pay taxes online, including facilitating online advance tax payments?
Only certain taxpayers, such as companies and audited non-company taxpayers, are required to pay taxes online. Others can choose to pay physically by submitting the challan at designated banks. However, paying online is convenient and saves time.
Q2. Which advantages are associated with paying taxes online?
Absolutely! Online payments save time and can be made anytime, anywhere.
