January 30, 2023

December 15 is the due date for paying the third installment of advance tax.

Many taxpayers will not be conscious of advance tax liabilities whether or not they should trouble about it. That is the case particularly with salaried people who consider that their tax legal responsibility is taken care of by the employer they usually needn’t do something on their very own.

Nevertheless, the actual fact is that even if you’re a salaried particular person and tax is getting deducted at supply (TDS) by your employer, there will be eventualities the place advance tax legal responsibility might come up for you. Learn on to know all about it.

Additionally learn: First yr within the job? Full your tax planning over the following three months

Perceive your advance tax legal responsibility

Advance tax is the tax that you simply pay inside the similar monetary yr wherein the earnings is earned. All taxpayers — salaried, freelancers, and companies — whose estimated earnings leads to tax legal responsibility of greater than Rs 10,000 within the monetary yr are required to pay advance tax.

Nevertheless, a resident senior citizen (a person of the age of 60 years or above) not having any earnings from enterprise or career shouldn’t be liable to pay advance tax. Additionally, a salaried one that doesn’t have any earnings aside from wage, needn’t pay advance tax instalments, as employers are required to deduct the relevant tax from the month-to-month wage and pay to the Revenue Tax Division.

Advance tax to be paid in 4 installments

Taxpayers are required to pay their annual estimated advance tax legal responsibility in 4 instalments of 15 %, 45 %, 75 % and 100%, on or earlier than June 15, September 15, December 15 and March 15, respectively. This successfully signifies that they pay as they earn.

On the similar time, the system ensures a gradual stream of earnings tax to the exchequer. Nevertheless, taxpayers who opted for the presumptive taxation scheme (PTS) of Part 44AD or Part 44ADA are liable to pay 100% of advance tax by March 15.

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Pay advance tax on time to avoid penal interest

Additionally learn: Submitting returns underneath presumptive taxation scheme? You will need to proceed doing so for 5 years 

Calculating the advance tax payable

The computation of advance tax will be performed by estimating the gross whole earnings. For this objective, it is best to membership the estimated earnings underneath all of the 5 earnings heads — earnings from salaries, home property, capital positive factors, enterprise or career, and different sources. Now that you must calculate internet earnings, by claiming deduction underneath numerous sections from 80C to 80U from the gross whole earnings.

After you have arrived on the internet earnings, calculate the tax legal responsibility on the identical in response to the earnings tax slabs relevant to you.

You may as well take the assistance of the calculator out there on the earnings tax india web site for advance tax calculation.

Subsequent, calculate the advance tax legal responsibility for the upcoming instalment, i.e. 75 % by December 15. You may deduct the advance tax paid earlier, TDS, tax collected at supply (TCS), and so forth from the 75 % quantity of the entire estimated tax to be paid within the yr. If there’s any shortfall it is best to pay it on or earlier than the due date.

As an illustration; in case your whole tax legal responsibility for the yr is Rs 2 lakh, it is best to pay Rs 1.5 lakh (75% of Rs 2 lakh) as tax by December 15. When you’ve got already paid Rs 1,25,000 within the type of advance tax and TDS, it is best to pay the remaining Rs 25,000 by December 15.

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Additionally learn: All about submitting earnings tax returns

Select the best evaluation yr whereas paying tax

You may pay the advance tax offline in addition to on-line. To pay offline, use tax cost challans (challan no. 280) at financial institution branches authorised by the Revenue Tax Division. For paying on-line, go browsing to the earnings tax division’s web site, www.incometaxindia.gov.in, and click on on e-Pay taxes. You’ll then be directed to the Nationwide Securities Depository Ltd (NSDL) web site. Click on on challan quantity 280, fill within the required particulars and make the cost.

Whereas making cost of tax, aside from different issues, be sure you clearly point out the main points within the challan. As an illustration, primarily based on who you’re — an organization or a person taxpayer — choose the choice underneath the top of cost, i.e., Company Tax/Revenue-tax (aside from corporations). Equally, fill the correct quantity and mode of cost of tax.

The most typical error that taxpayers make is choosing the unsuitable Evaluation Yr (AY). Do not forget that for the present monetary yr i.e. 2022-23, the relevant AY is 2023-24. So, be sure you choose the AY accordingly. You additionally must refill the Everlasting Account Quantity (PAN). As soon as you place in all the main points, these are displayed on the display screen and ought to be confirmed earlier than continuing with making the cost.

As soon as the advance tax is paid, it is going to be mirrored on the assessee’s Kind 26AS inside three to 4 working days of constructing the cost.

Penalty for lacking due dates

For those who miss paying advance tax on time or pay lower than the mandatorily required quantity, the due quantity attracts penal curiosity on a month-to-month foundation. The penal curiosity on the fee of 1 % monthly kicks in if the shortfall within the advance tax instalment is greater than 25 % of the quantity itself. Curiosity is charged on the shortfall quantity.

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As an illustration, in case your tax legal responsibility was assessed on June 15, 2021, i.e. when the primary instalment of advance tax turns into due, as Rs 2 lakh for fiscal 2022-23, it is best to have paid Rs 30,000 (15 % of Rs 2 lakh) as the primary instalment of the advance tax.

For those who had missed paying the whole quantity of the primary instalment, your whole advance tax legal responsibility for the second instalment on September 15 would have been Rs 90,000 (45 % of Rs 2 lakh) together with curiosity on first instalment dues.

Curiosity would have been relevant at 1 % monthly for 3 months i.e., June 15 to September 15, Rs 900 (3% of Rs 30,000—first instalment dues). So, it is best to have paid a complete of Rs 90,900 as tax to be heading in the right direction.

For those who additionally did not clear the second installment of advance tax legal responsibility utterly, your whole advance tax legal responsibility for the upcoming third instalment could be Rs 1,50,000 (75 % of Rs 2 lakh). Curiosity could be relevant at 1 % monthly for six months i.e., June 15 to December 15 on a part of first instalment dues (Rs 30,000) and for 3 months i.e., September 15 to December 15 on a part of the second instalment (Rs 30,000, i.e. Rs 90,000 minus Rs 60,000), Rs 1,800 and Rs 1,800 respectively.

The sum Rs 1,53,600 (Rs 1,50,000 plus Rs 1,800 plus Rs 1,800) shall be paid because the third instalment of advance tax legal responsibility, on or earlier than December 15.Additional, in case you fail to pay even the third instalment of advance tax, the curiosity calculation will proceed till you pay the due taxes.