Direct tax collection is one of the significant sources of revenue for the government while levied as a mandatory payment for taxable individuals and entities in the country. Therefore, to ensure a steady flow of revenue throughout the whole year, it introduced the advance tax payment system. It refers to paying part of one’s tax before the current financial year ends.
Hence, here are some smart things that one should know about income tax payment in advance –
Who are liable to pay tax in advance?
Individuals with incomes above Rs.10,000 a year need to pay taxes in advance. Salaried individuals, businesspersons, companies, and corporate organisations are required to pay tax as they earn. It is because, since they have a wide range of income sources, complications can arise, which may prevent them from paying tax at the end of the year.
Applicability of tax payment in advance
Payment of tax in advance is only applicable to other income sources such as interests on fixed deposits, capital gains on shares, lottery winnings, etc. It is not applicable on salary since in that case tax is deducted at source.
Due dates for paying tax in advance
The due dates for paying taxes in advance for entities and individuals have been listed below –
- It must be paid on or before 15th of September, December, and March; and the instalment amount is payable in the ratio 30%, 30% and 40% respectively.
- In the case of companies, the tax should be paid before the 15th of June, September, December, and March.
Additionally, in the case of failure to pay this tax, one will need to pay interest at 1% on the defaulted amount for every month till the next payment date. Advance tax is calculated on the total income amount after taking into consideration all applicable tax exemptions. They can opt for advance tax calculators to compute the amount they are liable to pay.
Consequently, Individuals who have opted for a home loan should calculate tax exemption under section 24, 80C and 80EEA before paying the tax on capital gains from house property.
