As the name implies, advance tax payment is a way to pay taxes to the government ahead of time and is only valid in specific circumstances. Both individuals and corporate businesses are subject to this tax burden, which is covered by section 208 of the Income Tax Act of 1961. What qualifies you for an early tax payment, then? Exist any exceptions to this rule? How are your advance taxes calculated? Continue reading to learn more!

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It is your responsibility as a responsible citizen of the nation to be aware of your personal tax obligations and to make timely tax payments. As a result, paying taxes in advance is an essential financial responsibility for both people and companies in India. The importance, deadline, amount, and other specifics of advance tax payments are all covered in this article. Continue reading to determine if this tax liability applies to you.

 

What does it mean to advance tax payment?

Advance tax payment, sometimes known as earn tax, is a system in which taxpayers pay their taxes in installments during the course of the fiscal year as opposed to paying the full amount at the end of the year. It’s a means of guaranteeing consistent and punctual tax payments.

It is necessary for people to assess their yearly income and determine their tax obligation accordingly. They must pay their taxes in four installments, or advance tax payments, on certain due dates, based on this estimate.

Advance tax payments are required of everyone with a tax due of more than or equal to Rs 10,000 in a financial year, as per section 208 of the Income Tax Act of 1961. Individuals can avoid incurring fines or interest charges for late payments, as well as the hardship of having to pay a sizable amount at the end of the year, by paying advance tax.

 

Why is advance tax payment important?

The following justifies the significance of paying taxes in advance:

• Avoiding penalties: Individuals can avoid penalties levied by the Income Tax Department by paying advance tax. The tax liability may be further increased by interest and penalties associated with late payment of advance tax.
• Managing cash flow: Paying taxes in advance enables people to make better financial plans. They can effectively manage their cash flow and prevent last-minute financial stress by anticipating and paying taxes.
• Contributing to the development of the nation: Prepayment of taxes is essential to nation-building. It assists the government in providing funds for a range of infrastructure improvements, social welfare initiatives, and development projects that benefit India’s inhabitants.
• Building a good reputation: Paying advance taxes on time shows fiscal restraint and accountability. It helps people establish credibility in the marketplace and cultivate a positive reputation with the tax authorities.
• Avoiding interest burden: Postponing tax payments may result in higher interest costs. People can guarantee a hassle-free tax compliance process and prevent needless interest costs by making timely advance tax payments.

 

Who is eligible to advance tax payments?

In the following situations, prepayment of taxes is require:

• Individuals: Advance tax payment is necessary for any individual who receives income from sources other than salaries, such as capital gains, interest income, or rental income. This covers consultants, independent contractors, and business owners.
• Self-employed professionals: Independent contractors such as physicians, solicitors, architects, & chartered accountants must also pay advance tax. They must project their yearly revenue and make installment tax payments in line with that projection.
• Businesses: If a partnership, limited liability company (LLP), or company elects to use Section 44AD’s presumptive tax structure, they must pay advance tax. They must pay their whole advance tax liability in one installment by March 31st, or by March 15th, at the latest.

 

Due Dates and amount of advance tax payments

There are four dates to be aware of in this regard, and the percentage of advance tax that you must pay varies depending on the date. The deadlines and advance taxes that apply to both individuals and businesses are listed in the following table:

Advance tax payment: Due dates and amount payable
Due dates	Tax payable (in percentage)
On or before March 15	100
On or before June 15	15
On or before December 15	75
On or before September 15	45

 

For example, Mr. Kohli has to pay advance tax and has an annual tax burden of Rs. 112,000. If so, the following will be the strategy for his advance tax:

• Tax payment in advance of Rs 16,800 (15%) must be made by June 15 at the latest.
• A 45 percent advance tax payment of Rs 33,600 is required by September 15 at the latest.
• A seventy-five percent advance tax payment of Rs 33,600 is required by December 15 at the latest.
• A 100% advance tax payment of Rs. 28,000 must be made by March 15 at the latest.

 

Who are exempted from advance tax payment?

Certain people and organisations are excuse from paying advance taxes in India. These exemptions are subject to certain limitations and are based on the occupation and income of the taxpayer. The following groups of people are not require to pay taxes in advance:

• Senior citizens are released from advance tax obligations if they are 60 years of age or older.
• The advance tax is not requires if the amount of TDS deducted exceeds the amount of tax owed for that year.
• Salaried people in the TDS bracket are not requires to pay advance taxes. On the other hand, there is an upfront tax obligation for any income derive from non-salary sources, including rent, interest, and capital gains.

To avoid any penalties or legal action, make sure you submit and pay your taxes on time. Seek guidance from a qualified financial expert to guarantee accuracy and timeliness in your tax filing.

 

 

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