Advance Tax

What is "Advance Tax"?

Normally the tax liability arises only at the end of financial year for the income earned during the financial year (i.e) from 1st April to 31st March. But when your tax liability exceeds a limit (currently it's Rs.10,000), then you have to pay tax in advance in installments.

If your tax liability is below Rs.10,000, then you need not pay tax in advance.

Advance-Tax Calculation Advance Income Tax In India

If you ask, "Why the Government is asking us to pay tax in Advance?" the answer is simple.

  • Revenue generation throughout the year.

  • Instead of waiting for a whole year, Government gets the revenue earlier.

  • The Taxpayer also will not feel the burden in entirety.

On this page:

How to Calculate Advance-tax Liability?

You have to estimate your total income. The total income includes,

  • Salary Income,

  • House Property Income,

  • Capital Gains,

  • Business Income, and

  • Income from other sources.

Once, you calculated the total income (projected) for current financial year, you have to calculate your tax liability based on the tax rates announced for that Financial year.

If the tax liability exceeds Rs.10,000, then you are liable to pay "Advance-tax".

For calculating the tax liability, the estimated TDS/TCS (deducted & to be deducted by others) are to be reduced.

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Advance-tax Calculation Example

Scenario 1

Let's assume you own a business, and your estimated annual taxable business income for this FY 2012-13 as Rs.3,00,000.

If you are assessed as an Individual, your tax liability would be Rs.10,300. Tax liability exceeds the limit Rs.10,000. You have to start paying your Advance-tax from September-2012.

Scenario 2

Mr.Pro works as a professor in City Medical College & earns salary of Rs.50,000 per month. He provides consultation at his own clinic and the average monthly Income is around Rs.50,000 and incurs around Rs.20,000 p.m. towards expenses. In addition he owns a residential house & earns rental income of Rs.30,000 per month, for which he pays Municipal Tax of Rs.3,000.

After deducting all the deductible expenses, the net taxable income comes to around Rs.12,10,000. Then his tax liability would be Rs.1,98,790. He can adjust the Salary TDS paid, say Rs.50,000. Hence, his net tax liability would be Rs.1,48,790.

Then he has to pay the Advance-tax in three installments as given below.

  • Rs.44637, 30% of Advance-tax on or before 15th September,

  • Rs.89274, 60% of Advance-tax or (Rs.1,19,274 - Advance-tax paid in september), on or before 15th December, and

  • Rs.148790, 100% of Advance-tax payable on or before 15th March.

Scenario 3

Mr.M is a salaried employee. Other than salary he has no other income. He sold his residential plot for Rs. 75,00,000, on 08-May-2012. He incurs long term capital gains of Rs.58,64,583, for the FY 2012-13. The tax @ 20% and including Education Cess would be Rs.12,08,104

Mr.M has to pay Advance-tax on capital gains as given below.

  • Rs.362431, 30% of Advance-tax payable on or before 15th September,

  • Rs.724862, 60% of Advance-tax payable on or before 15th December, and

  • Rs.1208104, 100% of Advance-tax payable on or before 15th March.

In case the asset was sold on 10-Oct-2012, then the Long Term Capital Gains and Tax Liability would remain same. However, the Advance-tax payment would arise as under: -

  • Rs.724862, 60% of Advance-tax payable on or before 15th December, and

  • Rs.1208104, 100% of advance tax payable on or before 15th March.

That is, you are not expected to pay the first installment, since the sale happens only thereafter (impossibility in performance is excused). However, you are expected to pay the tax liability in the future applicable installments.

Scenario 4

AB Pvt Ltd., has taxable income of around Rs.25,00,000. The Tax liability would be Rs.7,72,500. TDS is Rs.3,45,000. Then it has to pay the Advance-tax (Rs.4,27,500) as given below.

  • Rs.64125, 15% of Advance-tax payable on or before 15th June.

  • Rs.192375, 45% of Advance-tax payable on or before 15th September,

  • Rs.320625, 75% of Advance-tax payable on or before 15th December, and

  • Rs.427500 100% of advance tax payable on or before 15th March.

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Interest for non-payment of Advance-Tax

In case you didn't pay your advance tax with in the due date, then interest at the rate of 1% is payable in addition to the advance-tax payable amount, either under section 234C (not for paying in deferred installments upto 31st March) or under section 234B (charged from 1st April for not paying Advance Tax within 31st march, upto the date of actual payment). For calculating interest, part of the month is rounded to whole month.

However, in the case of the Company, if the June 15 and September 15 installment paid is at least 12% and 36%, respectively, then the Company need not pay the interest for the shortfall in Advance Tax paid (as compared to 15% and 45%). Needless to say, if the Advance Tax payment falls below the 12% or 36%, as the case may be, Interest would apply.

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Advance tax Due Dates for Non-Corporate Assessee

Rate Date
30% 15th September
60% 15th December
100% 15th March

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Advance tax Due Dates for Corporate Assessee

Rate Date
15% 15th June
45% 15th September
75% 15th December
100% 15th March

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Where can I pay advance tax?

  • Allahabad Bank

  • Andhra Bank

  • Axis Bank

  • Bank of Baroda

  • Bank of India

  • Bank of Maharashtra

  • Canara Bank

  • Central Bank of India

  • Corporation Bank

  • Dena Bank

  • HDFC Bank

  • ICICI Bank

  • IDBI Bank

  • Indian Bank

  • Indian Overseas Bank

  • Jammu & Kashmir Bank

  • Oriental Bank of Commerce

  • Punjab and Sind Bank

  • Punjab National Bank

  • State Bank of Bikaner & Jaipur

  • State Bank of Hyderabad

  • State Bank of India

  • State Bank of Bikaner & Jaipur

  • State Bank of Hyderabad

  • State Bank of India

  • State Bank of Bikaner & Jaipur

  • State Bank of Hyderabad

  • State Bank of India

  • State Bank of Mysore

  • State Bank of Patiala

  • State Bank of Travancore

  • Syndicate Bank

  • UCO Bank

  • Union Bank of India

  • United Bank of India

  • Vijaya Bank

If you have net banking facility of any of the Authorised Banks listed above, you can pay your Advance Tax online.

You can also pay at any of the Authorised Banks directly. Click here to download Challan 280 to pay your advance tax.

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Advance tax Refund

In case you paid advance tax in excess of your tax liability, you can claim it as refund from the Income-tax Department.

If the refund is more than 10% of your tax liability, ITD will pay you interest at the rate of 6% per annum.

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