Can You Claim Deductions Like 80C, 80D While Paying Advance Tax?
- Rajesh Kumar Kar
- Apr 1
- 9 min read
In India, taxpayers are required to pay advance tax if their tax liability exceeds ₹10,000 in a financial year. Advance tax is essentially a way to pay taxes in installments throughout the year, based on estimated income. This system helps individuals and businesses manage their tax liabilities without burdening them with a large payment at the end of the year.
When calculating the advance tax, many taxpayers wonder whether they can claim deductions like Section 80C and Section 80D, which are available under the Income Tax Act. These deductions help reduce the overall taxable income, and it’s crucial to know how to apply them while estimating your advance tax liability.
Table of Contents
Understanding Section 80C and Section 80D Deductions
Section 80C Deductions
Section 80C allows taxpayers to claim deductions on investments in specific instruments up to a maximum limit of ₹1.5 lakh per financial year. This is one of the most popular tax-saving sections, especially for individuals who want to reduce their taxable income. The eligible investment instruments under Section 80C include:
Public Provident Fund (PPF)
Life Insurance Premiums
Employee Provident Fund (EPF)
National Savings Certificates (NSC)
Tax-saving Fixed Deposits
National Pension System (NPS) (within the specified limit)
These investments not only provide tax benefits under Section 80C but also help in building long-term savings.
Section 80D Deductions
Section 80D provides deductions for health insurance premiums paid for self, family, and parents. This section is crucial for encouraging individuals to secure health insurance and improve financial well-being. The deduction limit under Section 80D is:
₹25,000 for premiums paid for self, spouse, and children.
₹50,000 for premiums paid for senior citizens (aged 60 years or above).
An additional ₹25,000 for premiums paid for parents (₹50,000 for senior citizen parents).
Section 80D also covers preventive health check-up expenses and medical expenses incurred for senior citizens who do not have insurance.
Both these sections, 80C and 80D, offer significant opportunities for taxpayers to reduce their taxable income and optimize their tax planning. Understanding how these deductions apply while paying advance tax is essential for accurate financial planning and compliance with tax obligations.
How to Claim Deductions Like 80C, 80D while Paying Advance Tax?
When you are paying advance tax, it’s essential to estimate your income accurately and apply any eligible deductions to reduce your overall taxable income. Deductions like Section 80C and Section 80D can help lower your taxable income, thereby reducing your advance tax liability. Here’s how you can apply these deductions:
Process of Estimating Income and Applying Deductions
Estimate Total Income:Start by calculating your total income from all sources, such as:
Salary
Rental income
Capital gains
Business or professional income
Other sources (interest, etc.)
Apply Section 80C Deductions:Deduct eligible investments under Section 80C, up to ₹1.5 lakh, such as:Employee Provident Fund (EPF)
Public Provident Fund (PPF)
Life Insurance Premiums (LIC)
National Savings Certificates (NSC)
Tax-saving Fixed Deposits
Apply Section 80D Deductions:If you have paid health insurance premiums for yourself, your family, or your parents, deduct the premiums under Section 80D. The limits are:
Up to ₹25,000 for self, spouse, and children (₹50,000 for senior citizens).
Additional deduction for parents: ₹25,000 for non-senior citizens, ₹50,000 for senior citizens.
Reduce Income by Other Eligible Deductions: In addition to 80C and 80D, you may also have other deductions like:
Section 80E for education loans
Section 80G for donations
Section 80TTA for savings interest
Step-by-Step Procedure to Reduce Taxable Income Before Advance Tax Calculation
Calculate Gross Income:Begin with your total income from all sources.
Subtract Deductions:Apply Section 80C, Section 80D, and any other relevant deductions to your gross income. This will reduce your total taxable income.
Recalculate Taxable Income:After applying deductions, your taxable income will be reduced. This is the income on which your advance tax liability is calculated.
Steps to Calculate Advance Tax After Claiming Deductions Like 80C, 80D
Once you have applied the deductions, follow these steps to calculate the advance tax liability:
Determining the Tax Payable After Considering Deductions Like 80C, 80D
Apply the Relevant Tax Slabs:
Based on your taxable income, apply the applicable tax slabs to determine your tax liability.
Subtract TDS:
If any Tax Deducted at Source (TDS) has already been deducted from your salary or other income, subtract it from the total tax payable.
Calculate Advance Tax:
If your net tax liability exceeds ₹10,000 after considering TDS, you will need to pay advance tax in installments.
Follow the deadlines for each installment:
1st installment (15th June)
2nd installment (15th September)
3rd installment (15th December)
4th installment (15th March)
By following these steps, you can ensure that your taxable income is appropriately adjusted for deductions and that the correct amount of advance tax is paid, avoiding penalties for underpayment.
Specific Considerations for Advance Tax Payments
Deadlines for Advance Tax Payments and the Consequences of Missing Them Advance tax payments must be made in four installments throughout the financial year. These deadlines are:
June 15 for 15% of the total advance tax
September 15 for 45% of the total advance tax
December 15 for 75% of the total advance tax
March 15 for 100% of the total advance tax
If you fail to make the payments by the respective due dates, the tax authorities will levy penalties and interest charges for the delay. These penalties are calculated as a percentage of the overdue amount and may significantly increase your overall tax liability.
Understanding Penalties and Interest Under Sections 234B and 234C Under Section 234B, if advance tax is not paid or is paid incorrectly, interest is charged on the outstanding amount at a rate of 1% per month or part of the month. This interest is calculated from the first day of the assessment year until the date of payment of the tax.
Section 234C deals with the underpayment of advance tax in the quarterly installments. If the advance tax paid is less than the prescribed percentage in any of the installments, interest is charged at a rate of 1% per month for three months, from the due date of the installment.
These penalties can quickly accumulate, leading to substantial additional costs if deadlines are missed or amounts underpaid.
Impact of the New Tax Regime on Deductions Like 80C and 80D
How the New Tax Regime Affects the Availability of Deductions Under Section 80C and 80DThe new tax regime introduced in the Union Budget 2024 does not allow taxpayers to claim deductions under Section 80C (such as investments in PPF, EPF, ELSS, etc.) or Section 80D (health insurance premiums). If you opt for the new tax regime, you cannot claim these deductions while calculating your taxable income, which may result in a higher tax liability compared to the old tax regime.
However, some specific deductions like Section 80CCD(2), which allows deductions for NPS contributions by the employer, remain available under the new tax regime.
Differences Between the Old and New Tax Regimes in Terms of Deductions and Tax PlanningThe key difference between the old and new tax regimes lies in the availability of deductions. Under the old tax regime, you can claim a wide range of deductions, including those for investments (80C), health insurance (80D), and others like home loan interest and NPS contributions. This flexibility can significantly reduce your taxable income.
In contrast, the new tax regime offers lower tax slabs, but you must forego all deductions. This regime simplifies tax filing and may be beneficial for individuals who do not have significant deductions or prefer not to keep track of them. However, for those who can claim deductions, the old tax regime might provide more opportunities to reduce taxable income.
Ultimately, taxpayers should carefully evaluate their total deductions and tax liabilities before deciding between the two regimes. If your deductions are substantial, the old regime might be more beneficial. If you have fewer deductions and prefer a simpler approach, the new regime could be a better option.
Conclusion
When paying advance tax, it is essential to consider how deductions under Section 80C and 80D affect your taxable income. These deductions can reduce your overall tax liability, and it is important to account for them when estimating the advance tax payments you need to make. However, with the introduction of the new tax regime, these deductions are no longer available, which may make the old tax regime a better choice for taxpayers with significant deductions.
Be sure to meet the deadlines for advance tax payments to avoid penalties and interest. Whether you opt for the old or new tax regime, understanding how deductions and advance tax payments interact is crucial for effective tax planning. Always calculate your advance tax payments accurately, apply the appropriate deductions, and avoid delays to ensure compliance and minimize penalties.
FAQs
1. Can I claim Section 80C and 80D deductions while paying advance tax?
Yes, you can claim deductions under Section 80C (up to ₹1.5 lakh) and Section 80D (for health insurance premiums) while paying advance tax. These deductions will reduce your taxable income, which in turn lowers your advance tax liability.
2. How do I calculate my taxable income after applying Section 80C and 80D deductions?
To calculate your taxable income after applying deductions:
Estimate your total income from all sources (salary, business, capital gains, etc.).
Subtract deductions under Section 80C (for investments like PPF, ELSS, LIC premiums) and 80D (for health insurance premiums).
The remaining income is your taxable income, which is used to calculate your advance tax liability.
3. Are there any restrictions on claiming Section 80C and 80D deductions while paying advance tax?
No, there are no specific restrictions on claiming these deductions while paying advance tax. The only requirement is that the deductions should be available under the Income Tax Act and you must have made eligible payments.
4. Can I claim Section 80C and 80D deductions if I pay advance tax in multiple installments?
Yes, you can claim deductions for 80C and 80D across all advance tax installments, as long as the deductions apply to the income for the entire financial year. You must estimate your total income and deductions before each installment.
5. Is it mandatory to pay advance tax if I am claiming deductions under 80C and 80D?
Yes, it is mandatory to pay advance tax if your total tax liability exceeds ₹10,000 in a financial year, regardless of whether you are claiming deductions under Section 80C or 80D.
6. Can I claim deductions for health insurance premiums paid for my parents while paying advance tax?
Yes, under Section 80D, you can claim a deduction for health insurance premiums paid for your parents (both senior citizens and non-senior citizens). This deduction can be claimed while paying advance tax, and it will reduce your taxable income.
7. Do I need to submit proof of deductions like 80C and 80D when paying advance tax?
No, you do not need to submit proof of deductions when paying advance tax. However, you should keep the relevant documents (such as receipts for premiums paid or investment certificates) handy in case of any scrutiny or during the tax return filing process.
8. Can I adjust the advance tax payment if my actual deductions under 80C and 80D are higher than estimated?
Yes, if your actual deductions are higher than initially estimated, you can adjust your final tax liability when filing your tax return. However, for advance tax, it is recommended to provide the most accurate estimate possible to avoid penalties.
9. How do I apply deductions under Section 80C and 80D while filing my income tax return after paying advance tax?
When filing your income tax return, declare the deductions under Section 80C and 80D in the relevant sections of the ITR form. The tax paid as advance tax will be adjusted against the final tax liability, and the deductions will lower your total taxable income.
10. Can I claim 80C and 80D deductions if I choose the new tax regime?
No, if you opt for the new tax regime, you cannot claim deductions under Section 80C, 80D, or any other deductions. The new regime offers lower tax rates, but it does not allow exemptions and deductions.
11. What happens if I miss an advance tax payment after applying deductions like 80C and 80D?
If you miss an advance tax payment, you will be subject to penalties and interest under Sections 234B and 234C of the Income Tax Act. However, the deductions you claimed (like under 80C and 80D) will still apply when calculating the final tax liability for the year.
12. How can I avoid underestimating my tax liability when paying advance tax while claiming deductions?
To avoid underestimating your tax liability, estimate your income and deductions as accurately as possible throughout the year. Keep track of all eligible deductions, such as 80C and 80D, and update your estimates regularly to avoid any shortfall in advance tax payments.
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