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Advance Tax Meaning & Are You Liable To Pay?

Advance Income Tax:

  1. Who Needs to Pay Advance Tax:

    • Individuals, Hindu Undivided Families (HUFs), self-employed professionals, and businesses whose tax liability for the financial year exceeds Rs. 10,000 are required to pay advance tax.
  2. Due Dates for Payment:

    • Advance tax is typically paid in installments during the financial year, as specified by the Income Tax Department. For individuals, there are specific due dates for each installment, usually in September, December, and March.
  3. Calculation of Advance Tax Liability:

    • Tax liability is calculated based on an estimate of total income for the financial year, after considering deductions and exemptions. It’s important to accurately estimate income to avoid penalties for underpayment.
  4. Penalties for Non-payment or Underpayment:

    • Failure to pay advance tax or underpayment can lead to penalties under Section 234B and Section 234C of the Income Tax Act.

Paying Advance Tax Liability:

  1. Online Payment:

    • Taxpayers can pay their advance tax liability online through the Income Tax Department’s website or authorized banks. Online payment modes include net banking, credit/debit cards, or authorized payment facilitators.
  2. Challan Payment:

    • Taxpayers can also pay advance tax by visiting designated bank branches and depositing the tax amount using the appropriate challan forms provided by the Income Tax Department.
  3. Acknowledgment:

    • After making the payment, taxpayers should ensure they receive a challan counterfoil or an online receipt as proof of payment. This acknowledgment should be retained for future reference.
  4. Advance Tax Calculation and Assistance:

    • Taxpayers may seek assistance from tax professionals or utilize online calculators provided by the Income Tax Department to estimate their advance tax liability accurately.
  5. Adjustments and Refunds:

    • If there are any adjustments or refunds necessary at the end of the financial year due to overpayment or underpayment of advance tax, taxpayers can claim them while filing their income tax returns.
  6. Documentation and Record-keeping:

    • It’s crucial to maintain proper documentation of advance tax payments, including challans, receipts, and calculations, for audit purposes and to facilitate accurate filing of income tax returns.

Please note that tax laws and regulations may undergo changes, so it’s advisable to consult with a tax advisor or refer to the latest guidelines issued by the Income Tax Department for the most accurate and up-to-date information.