Who is eligible to pay advance tax?
If your total tax liability (after adjusting for TDS) exceeds Rs10,000 in a financial year, then you must pay advance tax. Advance tax applies to all tax payers including salaried, freelancers, professionals and senior citizens. While calculating the advance tax, you need to include income from all sources for the current year under various income heads. For instance, if an assessee earns via capital gains on shares, interest on fixed deposits, winnings from lottery or races, and capital gains on house property besides his regular business/salaried income, then he needs to pay advance tax on all income after adjusting expenses or losses. Some of the exceptions to this rule are:
- Senior citizens (above the age of 60 years) who are not running any business are exempt from paying advance tax.
- Salaried individuals under TDS net, are not required to pay advance tax on income from salary. However, they may still need to pay advance tax on income from other sources such as interest, capital gains, rent and other non-salary income.
- If the TDS deducted is more than tax payable for the year, one is exempted from paying advance tax.
How do you pay advance tax?
Offline method - Individuals may pay advance tax using tax payment challans at bank branches authorized by the Income Tax (I-T) Department. It can be deposited with the Reserve Bank of India, State Bank of India, ICICI Bank, HDFC Bank, Indian Overseas Bank, Indian Bank, Allahabad Bank, Syndicate Bank, Axis Bank, Punjab National Bank, Punjab & Sind Bank, and other authorized banks. There are 926 branches in India that accept advance tax payments.
Online method - Individuals may also pay it online through the I-T department or the National Securities Depository Ltd (NSDL). The challan is available online on income tax department website https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp. Payment can be made using netbanking facility of major banks in India. Advance tax challan is generated instantly and is identified by 3 unique fields –
- BSR code of the bank branch
- Date of payment
- serial number.
Keep a copy of the challan with you and check that it reflects correctly in the Form 26AS available on income tax website. You can claim credit for the advance tax paid at the time of filing your ITR after the end of the year.
Due date for advance tax payment AY2019-20
|% Advance Tax Payable||Due Date|
|15% of advance tax payable||On or before 15th June 2019|
|45% of advance tax payable*||On or before 15th September 2019|
|75% of advance tax payable*||On or before 15th December 2019|
|100% of advance tax payable||On or before 15th March 2020|
What are the penalties related to non-payment of advance tax?
- Penalty under Section 234B: If you fail to pay advance tax or the tax paid by you is less than 90% of the assessed tax, then you will be liable to pay simple interest at 1% every month. In case no advanced tax is paid, interest will be calculated on the amount which is equal to the tax levied, or else it will be calculated on the amount by which advance tax paid falls short of assessed tax.
- Penalty under section 234C: - In case you don't pay your due advance tax installment in time, you will be charged a simple interest of 1% for the next 3 months on the amount of shortfall, as a penalty. The penalty is purely due to the delay in paying the due advance tax.
What if advance tax is paid in excess of amount due?
Sometimes it happens that the advance tax paid by you is higher than your tax liability. If the amount paid as advance tax is higher than the total tax liability, the assessee will receive the excess amount as a refund. Interest @6% per annum will also be paid by the I-T Department to the assessee on the excess amount (if the amount is more than 10% of the tax liability).
Other important points to remember-
Any payment of advance tax made on or before March 31 shall also be treated as advance tax paid during financial year.
If the last day for payment of any instalment of advance tax is a day on which the receiving bank is closed, the assessee can make the payment on the next working day, and in such cases, the mandatory interest leviable under sections 234B and 234C would not be charged.
After March 31, 2008, all corporate assessees and other assessees need to make electronic payment of tax through internet banking facility offered by authorized banks. Alternatively, these taxpayers can make electronic payment of tax through internet by way of credit or debit cards. It is not necessary for the assessee to make payment of taxes from his own account in an authorized bank. However, the challan for making such payment must clearly indicate the Permanent Account Number (PAN) of the assessee on whose behalf of the payment is made.