Quick Summary
Advance Tax is the tax payable on estimated income that must be paid in installments during the financial year itself, if the estimated tax liability exceeds ₹10,000.
Advance Tax, also known as "pay-as-you-earn" tax, is a system where taxpayers pay their taxes in installments throughout the financial year rather than in a lump sum at the end. It applies when the estimated tax liability for the year exceeds ₹10,000.
Who Must Pay Advance Tax?
- Individuals with business or professional income
- Salaried employees with income from other sources exceeding TDS
- Companies and LLPs
- Partners in partnership firms
- Anyone whose estimated tax liability exceeds ₹10,000
Exemptions: Senior citizens (60+ years) who do not have income from business or profession are exempt from paying advance tax.
Due Dates for Advance Tax Payment
| Due Date | For All Assessees | For Presumptive Tax (44AD/44ADA) |
|---|---|---|
| On or before June 15 | Up to 15% of advance tax | - |
| On or before September 15 | Up to 45% of advance tax | - |
| On or before December 15 | Up to 75% of advance tax | - |
| On or before March 15 | Up to 100% of advance tax | 100% by March 31 |
Consequences of Non-Payment
- Interest under Section 234B: 1% per month if advance tax paid is less than 90% of assessed tax
- Interest under Section 234C: 1% per month for deferred installments
- Penalty may apply for willful default
How to Calculate Advance Tax
Estimate your total income for the year, compute tax liability, deduct TDS already deducted, and pay the balance in installments as per due dates.
Key Points
- Pay-as-you-earn system of taxation
- Applicable if tax liability exceeds ₹10,000
- Four installments: June, September, December, March
- Interest penalty for non/short payment
- Senior citizens exempt (without business income)
- Can be paid online through e-filing portal