Advance Tax

What is Advance Tax?

Advance Tax is part payment of your tax liability before the end of the financial year. It is also known as ‘pay as you earn’ tax. These payments have to be made in installments as per the specified due dates by the income tax department.

Who should pay Advance Tax?

If total tax liability is Rs 10,000 or more in a financial year, then the person is liable to pay advance tax. Provisions of advance tax apply to all tax payers say salaried, freelancers, and businesses. 

Presumptive Businesses– Taxpayers who opt for presumptive scheme where business income is assumed at 8% (6% In case of digital transactions) of turnover, provided the turnover during the Financial year is less than Rs 2 crore are liable to pay advance tax in lump-sum, not in installment basis.

Exemption:

Senior citizens (aged 60 years or more), and do not run a business, are exempt from paying advance tax.

Computation and Due Dates for payment of Advance Tax.

An Assessee has to estimate his current income and pay advance tax there on.

For this purpose,

  1. Estimate the total income of current financial year
  2. Calculate tax on such Income (A)
  3. Calculate surcharge, relief, health & education cess, etc., as applicable (B)
  4. Calculate total tax i.e., (A+B)
  5. Deduct TDS/TCS/MAT Credit
  6. Calculate net tax payable.

If the resulting tax liability is more than Rs. 10,000 then you are required to pay advance tax on installment basis as per the following schedule:

For both individual and corporate taxpayers for the FY 2018-19

Due Date Advance Tax Payable( as % of Advance Tax Payable)
On or before 15th June 2018 15% of advance tax
On or before 15th September 2018 45% of advance tax as reduced by the amount paid in the earlier installment.
On or before 15th December 2018 75% of advance tax as reduced by the amount paid in the earlier installment.
On or before 15th March 2019 100% of advance tax reduced by the amount paid in the earlier installment.

For taxpayers who have opted for Presumptive Taxation Scheme – Business Income for the FY 2018-19

Due Date Advance Tax Payable
By 15th March 2019 100% of Advance Tax

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