Advance tax

Advance Tax

The Advance Tax refers to paying a part of your yearly taxes in advance. Advance tax is the income tax payable if your tax liability exceeds Rs 10,000 in a financial year. It should be paid in the year in which the income is received. Hence, it is also known as the ‘pay-as-you-earn’ scheme.

It is applicable when an individual has sources of income other than his/her salary. For instance, if one is earning through capital gains, interest on investments, lottery, house property or business, the concept becomes relevant.

Liability to deposit

If you are salaried, you need not pay advance tax as your employer deducts tax at source (TDS). However, you still need to file it if you have other sources of income, increasing your liability to more than Rs 10,000. Professionals (self-employed) and businessmen will have to pay taxes in advance as, given their business income, the liability can be huge. The same goes for companies and corporates.


When to deposit

This self-assessment taxes have to be paid on the 15th of September, December and March, in installments of 30 per cent, 30 per cent and 40 per cent, respectively, for non-corporate. Corporate need to pay it on the 15th of June, September, December and March.

Where to deposit?

You can pay advance tax using the tax payment challan at the bank branches empanelled with the Income Tax (I-T) department. It can be deposited with the Reserve Bank of India, State Bank of India, ICICI Bank, HDFC Bank, Indian Overseas Bank, Indian Bank, and other authorised banks. There are 926 branches in India that can accept advance tax payments. You could also pay it online through the I-T department or the National Securities Depository site.


Determination of Liability:

Advance Tax Liability is applicable on all tax payers, whether salaried, freelancers or businesses. In case of salaried tax payers, if the employer deducts tax at source or TDS, then there is no further need of payment of advance tax.

However, if such an assessee has any other income other than salary, then he/she is required to meet advance tax liability for such income. Such incomes may include capital gains on shares or house property, interest on investments, etc. after making appropriate deductions for losses, if any.


How to do Calculation

An individual can calculate advance tax on their own and determine.

Listed below are the steps to calculate advance tax:

Determine the Income: Determine the income you receive other than your salary. It’s important to include any ongoing agreements that might pay out later.

Minus the Expenses: Deduct your expenses from the income. You can deduct expenses related to your work (freelancing) such as rent of the work place, travel expense, internet and phone costs.

Total the Income: Add up other income that you might receive in the form of rent, interest income etc. Deduct the TDS deducted from your salaried income.

Advance Tax: If the tax due exceeds Rs.10,000 then only one is required to pay .

calculation of Advance tax should be balanced
calculation of Advance tax should be balanced

How to Pay Online?

It can be paid online through the online facility offered by the Income Tax department. Listed below are the steps that need to be followed to make a successful online payment.

Go to the official Government website.

Select the right challan to pay your income tax.

Fill in the correct details in the form. You’ll have to fill in details such as the right assessment year, address, phone number, email address, bank name, captcha code and other such important details.

Once you are done filling in the details, you’ll be redirected to the bank’s Net Banking page.

Next, you’ll get details of your payment including your challan number.

It is important to report your payment after you’ve made the payment. You can do so by adding an additional entry under the paid tax page.


Late date of payment

If an individual forgets to pay the advance tax by the first deadline, then the individual has to pay interest. The interest is computed as 1% interest on the defaulted amount for every month until the tax is paid off completely. The same interest penalty will be applicable if you don’t pay by the second or third deadline.



Senior citizens (people above 60 years of age) who do not own any business are exempted from paying advance tax. Also, taxpayers who opt for presumptive schemes are exempted from paying advance tax. These schemes can be applied for by people whose business turnover is more than Rs.2 crores in a financial year. In the year 2016-17, such scheme was extended to doctors, lawyers and architects, provided their annual receipts totals to a maximum of Rs.50 Lakhs.


Benefits of depositing

Advance tax helps in reducing stress of taxpayers. By paying tax in advance, taxpayers do not have to worry about money shortage or tax payments at the last moment.

It speeds up the tax collection process.

It increases government funds as the government can earn an interest on the collected amount.

Advance tax saves people from defaulting on their tax payments.

It helps businesses in managing their finances well and provides an idea of the income they have earned during the year.


Challan 280 to be used

Challan 280 allows people to pay their income tax online on the website of the Income Tax Department of India. On the website, people have to select this challan and fill the form and then use it to pay taxes online/office. If they want to pay the tax offline, they have to download Challan 280 form from the Income tax welcome, fill it and submit it at the bank.



At the end of the year, if the Income Tax Department finds out that you have paid more tax than you should have paid, then it will refund the excess amount. Taxpayers can claim refund by filling and submitting Form 30. They have to make the claim within a period of one year from the last year of the assessment year.