Some people clear their bills on the last date, while others want to pay them off in advance and become free of headaches. The latter strategy shows better sense as their account balance reflects the net investable amount. Naturally, the option of advance payment of tax works best for them. What is advance payment of tax? Let’s understand it thoroughly as we proceed.
Paying income tax is compulsory for any Indian citizen under the age of 60 whose valid earning is more than Rs 2.5 lakh per annum in India. Also, NRIs with income generated in India or from business establishments in India, are liable to pay their income tax in India. The income tax payable for a financial year must be paid on or before a date (last date of IT return filing) in the next financial year.
Now if the tax liability exceeds Rs 10000 in a year, the assessee is liable to pay in advance installments based on the approximate assumption of total income in the assessment year. This is called Advance tax, also known as pay-as-you-earn tax, and has due dates for installment payments as decided by the income tax department.
How is tax calculated on advance payments?
Step1: Estimate your income
The first step is to estimate your income for the financial year for which you’re doing the advance tax calculation. For gross taxable income earned, the following heads of income should be taken into account:
- Salary income
- House property income
- Income from business and profession
- Capital gains
- Other sources
Step 2: Determine your income tax liability by applying your current tax slab.
You are liable to pay advance tax if your tax liability after deduction of TDS exceeds Rs.10,000.
Step 3: Computation of income under the old tax regime.
Suppose the estimated total income of Mr. X is Rs 8,00,000 for FY 2022-23.
Income from Salary
Less: Basic exemption limit
Gross Taxable Income
Tax on slab 2.5 Lakhs to 5 Lakhs (2,50,000 X 5%)
Tax on remaining income 5 Lakhs to 5.5 Lakhs i.e. (50,000 X 20%)
Add: Health & Education cess @4% (12,500 + 10,000) X 4%
Total Income Tax Payable
Therefore, the total payable tax for the financial year 2022-23 is Rs. 23,400.
Step 4: This amount has to be paid in four installments
The installments are to be paid just like the table below:
Advance Tax Installment
Installment Amount (in Rs)
Cumulative Amount (in Rs)
1st Installment (15%) Due date 15th June
2nd Installment (45%) Due date 15th September
3rd Installment (75%) Due date 15th December
4th Installment (100%) Due date 15th March
The above advance tax schedule is followed every year.
#1. Can I get a refund if the excess amount is paid in advance tax?
If you paid the excess advance tax, you would be entitled to a refund.
#2. Can I make an advance tax payment after 15 March?
The advance tax installments must be paid on or before the due dates (June 15, September 15, December 15 and March 15), failing which the assessee will have to pay interest on the unpaid amount, in accordance with Section 234C and Section 234B of the Income Tax Act 1961.
#3. How to check advance tax payment online?
You can also check the status of your advance tax payment in your Annual Information Statement (AIS) which can be checked online by logging into your income tax portal.
#4. Can a deduction under 80C be claimed while estimating income for the calculation of advance tax?
Yes, deductions under Section 80C can be claimed while estimating your income for the purpose of calculating your advance tax.
#5. Is an NRI required to pay advance tax?
Yes, an NRI is required to pay advance tax on income earned in India under the provisions of the Income Tax Act in effect for the applicable assessment year.