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What is Advance Tax?
The scheme of advance tax requires every assessee to estimate his current income and if tax liability on such estimated income exceeds the specified limit, the assessee is required to pay the estimated tax in instalments during the financial year itself. Thus, an assessee is required to pay tax as he earns and therefore the scheme of advance tax is also known as 'Pay as you Earn Scheme'.
Who is liable to pay advance tax?
Every person, whose estimated tax liability for the Financial Year is Rs. 10,000 or more, shall pay his taxes in advance in the form of "advance tax". However, a resident senior citizen (i.e., an individual of the age of 60 years or above) not having any income from a business or profession is not liable to pay advance tax.
How to pay advance tax?
The advance tax can be paid Online (electronically) or offline (through an authorized bank) by submitting the details in Challan No. ITNS 280. However, it is mandatory for a Company or a person (other than a company) who is required to get his accounts audited under section 44AB to pay the taxes through online mode only.
What are the due dates for payment of advance Tax?
| Instalment | The due date for payment of advance tax | Amount |
| First | On or before June 15th of the previous year | Not less than 15% of advance tax |
| Second | On or before September 15th of the previous year | Not less than 45% of advance tax as reduced by the amount paid in the earlier instalment |
| Third | On or before December 15th of the previous year | Not less than 75% of the advance tax as reduced by the amount paid in earlier instalments |
| Fourth | On or before March 15th of the previous year | 100% of advance tax as reduced by the amount paid in the earlier instalments |
An assessee, who declares his business or professional income in accordance with the presumptive tax scheme of section 44AD or section 44ADA, is required to discharge the whole amount of his advance tax liability on or before March 15th of the previous year. Thus, he can pay 100% of the advance tax in a single instalment on or before March 15 of the previous year.
Note: Any tax paid, on or before 31st March, shall also be treated as advance tax paid during the financial year.
What are the consequences of failure to deposit advance Tax?
If the assessee does not pay the advance tax in accordance with the specified due dates, he shall be liable to pay the following interest:
(a) Interest under section 234B for default in payment of advance tax
(b) Interest under section 234C for deferment of payment of advance tax.