What is Advance Tax Payment? How to calculate it ?

As the name itself suggests, the amount of tax paid in advance rather than lump-sum payment at the end of the year is “Advance tax”. Section 208 of the Income Tax Act 1961 governs the provision of Advance tax. It states that every person whose estimated tax liability for the year is equal to or exceeds rupees ten thousand is liable to pay advance tax.

Such tax is paid in specified percentages and on due dates as the income tax department provides. The deduction under Section 80C can also be claimed while calculating income for advance tax. Let us discuss more advanced tax payments through this article.

Who is liable to pay Advance Tax?

The eligibility criteria for payment of advance tax are stated under:

• If the taxpayer's tax liability is 10,000 or more in a financial year.
• Earning from sources other than salary.
• Applicable for self-employed individuals/professionals/businessmen if their income exceeds the specified limit.

Further, senior citizens who are more than sixty years of age or above and salaried individuals falling under the TDS net are exempted from payment of the advance tax.

How to calculate Advance Tax, and on what basis is payment made for the same?

Basis of Calculation: Advance tax is calculated based on the expected tax liability of the year.

Basis of Payment: Advance tax is paid in the following installments:

For all the assessees (other than the assessees as referred to in section 44AD and 44ADA)

Where assessee opted for Presumptive Taxation Scheme under section 44AD & 44ADA

How to make Advance Tax Payments?

To make an advance tax payment online, the taxpayer needs to follow the below steps:

Step I:

Visit the portal of Tax Information Network of Income Tax Department (https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp)

Step II:

Select the relevant challan, i.e., ITNS 280 for Payment of Advance tax. Click proceed button.

Step III:

Fill in the necessary details that include PAN detail, assessment year (A/Y), address of the taxpayer and the bank through which payment is to be made, type of payment, etc. Then enter the captcha and click proceed button.

Step IV:

After data is submitted, a confirmation message will appear.

If PAN / TAN is entered correctly as per the ITD PAN / TAN master data, then the taxpayer's full name as per the master data will appear on the confirmation message.

Step V:

Taxpayers must check the data entered after that next step is payment through the net-banking web page.

Step VI:

The taxpayer needs to log in with the user id and password to the net-banking web page for making the payment.

Step VII:

Once payment is made, it will display a challan (receipt) with details, including the payment details, name of the bank through which e-payment is made. The taxpayer must save a copy of the challan as proof of payment.