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Advance tax refers to paying a part of your taxes before the end of the financial year. Also called ‘pay-as-you-earn’ scheme, advance tax is the income tax payable if your tax liability is more than Rs10,000 in a financial year. It should be paid in the year in which the income is received.

Rather than receiving all tax payments at the end of the year, advance tax receipts help the government get a constant flow of income throughout the year so that expenses can be met.

For Example, if your Expected tax liability for the financial year 2019-20 has exceeded Rs 10,000, you are expected to pay it in FY 2019-20 itself.

Who Should Pay Advance Tax?

Advance tax is applicable when :

Assessee has sources of income

and

Expected Tax Liability for the Year is more than Rs 10000.

 For example, if an assessee earns via Regular Business Profit , capital gains on shares, interest on fixed deposits, winnings from lottery or races, and capital gains on house property then he needs to pay advance tax on all income after adjusting expenses or losses. 

If you are a salaried employee, you need not pay advance tax as your employer deducts it at source, known as TDS (tax deducted at source).

Due Date of Payment

For Self-employed and businessmen

Due date of installmentAmount payable
On or before September 15 Not less than 30% of the tax liability
On or before December 15 Not less than 60% of the tax liability
On or before March 15 100% of the tax liability

For Companies

Due date of installmentAmount payable
On or before June 15 Not less than 15% of the tax liability
On or before September 15 Not less than 45% of the tax liability
On or before December 15 Not less than 75% of the tax liability
On or before March 15 100% of the advance tax liability

for self-employed individuals as well as businessmen has to pay on the 15th of September, December, and March in installments of 30%, 30%, and 40%, respectively,

Companies need to pay on the 15th of June, September, December, and March.

How to Make Payment

Modes: Cheque, cash, or Online Payment Via NSDL

Detailed reading About tax payment Click here

What if it is not Paid?

If you fail to pay your advance tax or the amount you pay is less than the mandated 30% of the total liability by the first deadline (September 25), you will be liable to pay interest on the amount, which comes to 1% simple interest per month on the defaulted amount for three months.


The same interest penalty would apply if you fail to pay the amount by the second deadline (December 15). Failing to pay the third and last installment (March 25) would mean paying 1% simple interest on the defaulted amount for every month until the tax is fully paid.

If Advance Tax is Paid More than Required Tax Liability.

If the amount paid 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).

Pay Advance Tax On Time So as to be saved from the Interest Liability at the end.

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Author: Taxwix

Taxwix – Making Your Idea Happen Taxwix.com has a team of experts like, CA, CS and Lawyers etc having the great dominance in field of the Corporate Compliance along with Advisory,Taxation and Finance. Taxwix team guides the Startups with their Idea and help help them to take ahead in the Legal Manner, helps in proper managing the business with accurate and timely Compliance. Taxwix has as simple 5 Step process to be followed to complete compliance

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