Advance Tax Explained: Key Dates, Calculation, and Payment Process

Advance tax is the income tax payable by individuals who earn from other sources along with their salary. Rent, capital gains from shares, fixed deposits, lottery, etc. are a few examples of income sources covered under advance taxation. 

There is a simple and easy process to make advance tax payments online. You can do so using tax payment challans at authorised banks. You can also make advance tax payments through the official website of the Income Tax Department or the National Securities Depository Limited (NSDL).

Now that you know the meaning of advance tax, understand the below points to know who is liable to pay advance:

• If tax liability is ₹10,000 or more

• A salaried or self-employed individual

• If the income is received via capital gains on shares

• If one has earned interest on FD

• If one has won a lottery

• If one earns rental income or income earned through house property

• Senior citizens with business income must pay advance tax

• Taxpayers under Section 44AD must pay advance tax by 15 March or 31 March

• Professionals under section 44ADA pay advance tax by 15 March or 31 March

Here are the advance tax due dates you must adhere to:

For individuals and corporates:

If you have opted for the presumptive taxation scheme u/s 44AD and 44ADA, you must pay 100% of the advance tax by the 15th of March.

Follow the below steps to make the advance tax payment online:

1. Go to the e-filing portal of the Income Tax Department 

2. Locate the 'Quick Links' section on the homepage and select 'e-Pay Tax' 

3. Provide your PAN and your mobile number, and then click on ‘Continue’

4. Input the 6-digit OTP received on your mobile and proceed

5. Select the checkbox ‘Income Tax’ and click ‘Proceed’

6. Provide the ‘Assessment Year’ 

7. Select ‘Advance Tax (100)’ under ‘Type of Payment’ 

8. Click on 'Continue'

9. Enter the tax details 

10. Select the payment method and bank, then click on 'Continue'

11. Review the challan details and click on ‘Pay Now’

12. Save the acknowledgement for online advance tax payment

Note down the BSR code and challan number, which you'll need for your tax return.

Challan 280 enables you to pay income tax online via the Income Tax Department’s official website. You have to select this challan and fill out the form to make an online advance tax payment. In case you want to pay it offline, you can download challan 280, fill it out, and then submit it at the bank.

Here are the documents that you need to submit for advance tax payment:

• Aadhaar Card

• PAN Card

• Form 16, 16A, 16B, 16C

• Form 26AS

• Interest certificates issued by bank or post office

• Tax saving investment proof

• Salary slips and bank statement

• Home loan statement

• Capital gain statement

Learning how to calculate advance tax is important and quite easy. Here’s how: 

1. Calculate the total income earned from all sources for the financial year

2. Add your salary to the above sum to get your gross taxable income

3. Consider deductions, if any

4. Calculate the tax payable amount as per the applicable income tax slab 

5. Subtract the TDS already deducted, if any

To better understand the calculation of advance tax, consider the following example where your tax liability is ₹50,000. Here, your instalments for advance tax payments will be as follows: 

You can also use an advance tax calculator to know your advance tax liability easily. All you have to do is enter your income earned, applicable deductions, and other details.

Here is an overview of the advance tax penalty rate under different sections of the Income Tax Act. 

• Under Section 234B

By 31st March, you need to pay a minimum of 90% of the total taxes as TDS/TCS or advance tax. Non-payment will lead to a 1% interest on the unpaid amount.

• Under Section 234C