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Advance Tax

Introduction to tax - Tax constitutes


a major form of revenue for most of
the Governments across the world. Taxes are levied and spent by the government for
the development of the country like infrastructure, healthcare, defense etc. Taxes can
be categorized into two broad categories namely direct tax and indirect tax. A tax paid
directly by the person on whom it is levied is known as direct tax. Taxes where the
person paying and the person whom it is levied upon are two different people are an
indirect tax. Example of direct tax is income tax and an example of indirect tax is sales
tax.

Advance tax - Payment of tax liability by a person before the end of financial year is
called Advance tax. This is applicable only in case of Income tax of an individual or a
business entity. A simple question arises as why somebody would like to pay taxes in
advance.

Are you liable to pay advance tax?
Advance tax is payable only when an assessees total tax liability is exceeding Rs
10,000.

Advance tax Rates and Dates
For non corporate assessee installments of advance tax is to be paid as per the below
30% of tax payable should be paid as advance tax on or before 15th September
60% of tax payable should be paid as advance tax on or before 15th December
100% of tax payable should be paid as advance tax on or before 15th January
There are 4 installments of advance tax for corporate assessee.
15% of tax payable should be paid as advance tax on or before 15th June
45% of tax payable should be paid as advance tax on or before 15th September
75% of tax payable should be paid as advance tax on or before 15th December
100% of tax payable should be paid as advance tax on or before 15th March
Consequences of nonpayment of advance tax
If the amount of advance tax paid is less you will have to pay penalty interest as per the
below
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For Non Corporate assessee
If advance tax paid in the first two installments is less than specified, simple interest @
1% per month is charged on the deficit amount for a period of 3 months.
If the aggregate of advance tax paid is less than 90% of tax payable on 15th March
penalty of simple interest @ 1% per month is charged on the amount shortfall until the
tax is paid
For Corporate assessee
Simple interest @ of 1% is charged on the deficit amount for a term of 3 months if you
have failed to pay advance tax or if advance tax paid is less than tax due as per the
above slab. For the 4th and final installment if the advance tax paid is less than 90% of
tax payable simple interest @ 1% per month is charged on the deficit from 1st April until
the tax is fully paid.

How to pay advance tax?
Advance tax can be paid online through the website of income tax department. It can
also be paid by filling challan, ITNS 280 and submitting it at designated branches of
specified banks. SBI, Corporation bank and ICICI are some of the banks that accept
advance tax payments.

What if Advance tax paid is more than required?
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% p.a will be paid by the income tax
department to the assessee on the excess amount if the excess amount is more than
10% of tax liability.
Contributed By: Aruna Sharma Ask Aruna Sharma
Mrs. Sharma holds a Masters in Financial Management from University of Mumbai. She has graduated from the
University of Mumbai.