ADVANCE TAX

ADVANCE TAX

Advance tax is a system of "pay-as-you-earn" where taxpayers pay a portion of their income tax liability in installments throughout the financial year, instead of as a lump sum at the end.

Who is required to pay advance tax?

Any taxpayer, including salaried individuals, freelancers, and businesses, must pay advance tax if their estimated tax liability for the financial year is ₹10,000 or more. The liability is calculated after considering any Tax Deducted at Source (TDS). 

Exemptions to this rule include:

• Senior citizens: Resident individuals who are 60 years or older are not liable to pay advance tax if they do not have income from a business or profession.
• Salaried employees: A salaried employee generally does not have to pay advance tax if their employer deducts the correct amount of TDS. However, if they have other income sources like interest, rent, or capital gains that increase their total tax liability above the threshold, they must pay.

Special rule for presumptive taxation: Taxpayers who have opted for a presumptive taxation scheme under sections 44AD or 44ADA must pay their entire advance tax liability in a single installment on or before March 15 of the financial year. 

How to pay advance tax

1. Payments can be made online through the Income Tax Department's official e-filing portal using Challan No. ITNS 280. The process involves the following steps: 

2. Go to the e-filing portal incometax.gov.in.
3. Navigate to "e-Pay Tax" under the "Quick Links" section.
4. Enter your PAN and mobile number to verify with an OTP.
5. Select the relevant assessment year and "Advance Tax" as the type of payment.
6. Enter the tax details and choose your preferred payment method, such as net banking, debit card, or UPI.
7. Review and confirm the challan details to make the payment.