If the tax liability of a taxpayer exceeds Rs 10,000 after adjusting TCS/TCS or MAT credit, then it becomes mandatory for him to deposit advance tax. However, senior citizens get some relief in this matter.
This financial year (2024-25) is going to end on March 31. It is time to calculate your income tax liability and deposit the last installment of advance tax. Taxpayers have to pay income tax on the principle of ‘pay as you earn’. It becomes necessary for a person to pay advance tax when his tax after adjusting TDS/TCS exceeds Rs 10,000.
Who is required to pay advance tax?
If the tax liability of a taxpayer after adjusting TCS/TCS or MAT credit is more than Rs 10,000, then it becomes mandatory for him to pay advance tax. However, senior citizens get some relief in this matter. People above 60 years of age who do not have any income from business are exempted from paying advance tax.
How to calculate and pay advance tax?
Step 1: Select the tax regime
For individual and HUF taxpayers, the tax liability is calculated based on the choice of old or new tax regime. If you do not know which of the two regimes is beneficial for you, then it is better to calculate tax in both the regimes and you have to select the regime in which your tax is less.
Taxpayers who do not have any business or professional income are allowed to switch between the new regime and the old regime every year. However, taxpayers who have business income are required to use their chosen regime until they permanently select the old regime.
If a taxpayer changes his regime while filing income tax, then his advance tax liability will be calculated based on the regime chosen by him later. Then he will have to pay interest on the tax deposited if it is less.
Step 2: Adjust TCS/TDS credit to calculate net tax liability
Advance tax is calculated based on the estimated income of the current year and the applicable tax rate. The total TDS/TCS credited by the taxpayer is then adjusted against the total tax liability.
You can refer to Form 26AS to check your TDS/TCS credit. However, Form 26 will show TDS/TCS credit only if the deductor/collector has filed a TDS return. You have to estimate the TDS/TCS credit on your salary, interest or other source of income between January 1, 2025 and March 31, 2025.
We can understand this with the help of an example. Suppose the total tax liability of a taxpayer is Rs 15,000 and the TDS/TCS credit amount is Rs 6,000, then his net tax liability will be Rs 9,000. He will not have to pay advance tax. But, if the TDS/TCS is only Rs 4,900 and the net tax liability is Rs 10,100, then the taxpayer will have to deposit advance tax of Rs 10,100 in four installments.
Step 3: EMI calculation
Advance tax is deposited in four installments. The dates for this are fixed in advance. Each installment is calculated as a percentage of the total tax liability and the shortfall in the amount due is also included in it if the previous payment is less.
Advance tax to be paid by the due date in percentage if your net tax liability after adjusting for TDS/TCS and MAT comes to Rs 1 lakh
- 15 June 15% Rs 15000 will have to be paid
- 15 September: 45% amount i.e. Rs 30,000 will have to be paid (total tax paid is Rs 45,000)
- 15 December 75% Rs 30,000 to be paid (Total tax paid Rs 75,000)
- 15th March 100% Rs. 25000 to be paid (Total tax paid Rs. 100000)
Relief to some taxpayers
Taxpayers covered under the Presumptive Income Tax Scheme: Individual taxpayers who opt for the presumptive scheme under section 44AD or 44ADA of the Income Tax Act, 1961 are required to deposit only one installment of advance tax. They are required to calculate and deposit the total tax liability for the financial year before March 15.
Senior Citizens: Taxpayers who are above 60 years of age and do not have any income from business or profession are exempted from paying advance tax.
Advance tax payment can be made through the income tax portal (https://www.incometax.gov.in/iec/foportal/) using the ‘e-pay tax’ service. This can be found on the homepage in the ‘Quick Links’ section. Registered taxpayers can also use this facility by logging in to the portal.
For the financial year 2024-25, taxpayers need to select assessment year 2025-26 and select ‘Advance Tax (100)’ under Type of Payment (Minor Head).
What will happen if advance tax is not deposited?
If the advance tax installment is not paid, the Income Tax Department can charge interest under Section 234B and 234C of the Income Tax Act. Any delay in payment will attract additional money in the form of interest charges.
If a taxpayer pays less than 90 per cent of his total tax liability before March 31, he will have to pay interest at the simple interest rate of 1 per cent every month.
Interest on short payment or missed installment (Section 234C): Under this section, interest is levied on taxpayers who fail to pay their advance tax installment on time. An interest rate of 1 per cent per month has to be paid on this.
By paying advance tax on time, taxpayers do not have to pay any unnecessary interest. So do not wait till the last moment. After calculating your advance tax, pay it before March 15, 2025.
Most Read Articles:
- Vande Bharat Train: Good news for passengers! Railways will run special Vande Bharat train on this route, check route and schedule
- Employees DA Hike: Government employees will get Holi gift! A big decision on DA may come soon, know details
- Credit Card Link UPI: Link your credit card to UPI from home, know step-by-step guide
We have taken all measures to ensure that the information provided in this article and on our social media platform is credible, verified and sourced from other Big media Houses. For any feedback or complaint, reach out to us at businessleaguein@gmail.com
