Advance Tax: Eligibility, calculations and due dates

Income Tax
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:bulb:15th December 2024 is the due date to pay your 3rd advance tax instalment for FY 2024-25.

Many of us often assume that we are only required to pay taxes once a year while filing our Income Tax Return (ITR). However, this is not the case. You are required to pay taxes as you earn income throughout the entire financial year.

For instance, in the case of salary or dividend income, TDS is applicable, and hence, taxes are paid on your behalf. However, for incomes such as those from capital gains or businesses where TDS is not applicable, you are required to pay advance tax.

What is advance tax?

Advance tax, as the name suggests is paying your taxes in advance by estimating your tax liability for the year. These payments are generally made over 4 instalments, one every quarter.

Advance tax is beneficial for both taxpayers and the government. ensuring that the latter has a steady income stream to meet its expenditures and for you, it helps avoid the burden of paying a large sum of taxes at the end of the financial year.

Who is liable to pay advance tax?

If your estimated tax liability for the entire year exceeds ā‚¹10,000, you need to pay advance tax. To calculate your tax liability, you need to consider all your income sources, and if any TDS was deducted, it needs to be taken into account.

What are the due dates for each quarter?

Advance tax is payable in instalments on or before the due date which is 15th of the last month of the respective quarter. Below are the due dates:

Due dates for Advance Tax Instalments
Due dates for Advance Tax Instalments1058Ɨ301 26.5 KB

How is advance tax calculated?

  1. Estimate all your earnings in a given year
  2. Subtract the amount of deductions eligible
  3. Compute the tax liability as per the latest slab rates (special rates in case of capital gains) and the regime opted for.
  4. If the tax liability exceeds ā‚¹10,000, then you need to comply to the advance tax provisions.
  5. If any TDS was already paid, account for the same and make the advance tax payment for the remaining tax liability.

Here are some exceptions:

  • Individuals with salary income covered under TDS net are not liable to pay advance tax. However, any earnings from sources such as capital gains, rent, interest, or non-salary income are subject to advance tax.
  • Resident senior citizens aged 60 or above not having income under the ā€œIncome from Business & Professionā€ head are exempted from paying advance tax.
  • If you have opted for presumptive taxation scheme, the advance tax can be paid in one instalment on or before 15 March of the relevant year.
  • In case of capital gains, advance tax needs to be paid on accrual basis.

How to pay advance tax?

You can follow the below steps to make your advance tax payment on the e-filing portal:

  1. Log in to the e-filing portal
  2. Navigate to e-file > e-pay tax
  3. Select ā€˜Income taxā€™ category
  4. Enter the relevant assessment year (for FY 2024-25, AY 2025-26 needs to be selected) and select the type of payment as ā€˜advance tax (100)ā€™
  5. Click on continue, enter the tax amount and make the payment.

What are the consequences of late payment of advance tax?

If you fail to pay advance tax as per the quarterly instalments, a penal interest of 1% per month will be levied on the outstanding amount till the time you make the tax payment.

Hereā€™s a video for you!

Have questions? Shootā€™em here.

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2

Hi I have paid advance tax in September 2022 for financial year 2022-23 i.e assessment year 2023-24 but my tax paid amount is not reflecting on form 26AS. What should I do.

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Hi @Harsh_Vaidsain,

There can be a discrepancy in the income tax website.
You could verify with your AIS (Annual Information Statement) once if the amount is reflected over there or not.

Hope it helps.

4

when do we have to pay interest penalty for shortfall of advance tax u/s 234C ?

at the time of next advance tax payment ? or when we are filing ITR ?

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Hi @Private

Interest penalty u/s 234C is for deferment in payment of tax during the financial year.
So it can be applicable at the time of the next advance tax payment if the earlier installment is not paid, and if the last installment is not paid, it shall be applicable at the time of filing ITR.

Hope this helps.

6

Hi Team,

How to calculate advance tax in cases of F&O trading. My profit can vary throughout the year. Should I just pay tax on what I earned this quarter or any other method? (P.S. My salary income is more than 10 lakhs)

Also if I have carried forward losses from last year, do I take that into account while paying Advance tax?

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Hi @NavalKabra9

That is a very common question a lot of traders have. In such a case, you can calculate the tax liability based on the earnings until the advance tax installment, and usually by the time the last installment of advance tax is due on 15th March, traders have a better idea of the earnings. If there are excess dues, they can be paid when filing the ITR. On the other hand, if you have paid more in advance tax than your income tax liability, you can claim the refund for the same when filing your ITR. The tax credits for the advance tax paid will be reflected in your Form 26AS .

FnO is a non-speculative business income taxed at slab rates. Advance tax is payable if your estimated total income from all the sources exceeds ā‚¹10,000 in a financial year.
Advance tax is payable in quarterly installments if presumptive taxation is not opted for, and in one installment till 15 March of the financial year if presumptive taxation is opted for.
Steps to calculate advance tax:
Step 1: Estimate your yearly total income
Step 2: Calculate your total tax liability for the year
Step 3: Make a payment of advance tax as per the taxation scheme opted for.

Yes, you can consider previous yearsā€™ losses while calculating advance tax.
Hereā€™s how you can Calculation of Advance Tax : Help Center.

Hope this helps.

8

is it okay if we donā€™t pay first 3 installment of advance tax and pay all the advance tax by 15th march with penalties ?

is there any prosecution for non payment of first 3 advance tax installment?

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Hi @Private

If you donā€™t pay the first 3 installments of advance tax on or before the due date, you will have to pay interest at 1% per month as an interest penalty.

Hence, in order to avoid paying unnecessary extra tax, it is better to pay it on time.

In case youā€™re opting for the presumptive scheme, you can pay the advance tax in one installment till 15th March, without any interest penalty.

11

I want to know whether adavance tax is required to be paid on sale of house property by a senior citizen who is a resident individual and not having business income. If advance tax is not payable, is it sufficient if capital gains tax is paid on 31st July ?

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Hi @Narayanan_Nagarajan No advance tax is to be paid by Senior citizen on Capital Gains if there is no income from Business & Profession during the financial year.

Thus, you can pay tax on Capital Gains at the time of filing ITR on or before the due date i.e July 31, 2024 for AY 2024-25.

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13

i buy stocks and sell the same after few days, Should i pay advance tax if my annual earnings is less than 5 lac. If my earnings in last quarter brought my income into taxable then how can i calculate my advance tax. Kindly clarify

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Hi,

Advance tax needs to be paid in case your estimated tax liability for the financial year exceeds ā‚¹10,000.

Moreover, in the case of capital gains, you can pay advance tax on an accrual basis. This means that you can pay advance tax in the quarter in which you have incurred capital gains.

Hereā€™s a detailed read on how to calculate advance tax that may help further.

Hope this clarifies.

1 Like
17

Can someone explain how to calculate advance tax? And can I deduct charges like STT, GST, brokerage, etc., while paying advance tax? And I did not pay advance tax in Q1.

Q1 (Apr-1 to Jun 30)
Intraday profit 1.31L
Short term realized profit 2.86L

Total charges 72.28k

Q2 (July-1 to September 1*)
Intraday profit 44.15k
Short term realized profit 3.33L

Total charges 50.43k

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Hi @knight,

Yes, you can take the expenses incurred into account. Hereā€™s a detailed read on how advance tax needs to be calculated: Advance Tax: Eligibility, calculations and due dates.

Let us know if you have any further way doubts.

19

Can I also just pay advance tax without any deduction and enter any deductions when I file my return at the end of year?

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hey @knight ,

Yes one can always claim expenses and deductions later on while preparing and filing the ITR. In such case there is a probability that the assessee would have paid more advance taxes than required and thus will have an Income Tax Refund while filing the ITR.

Also STT is not allowed as a deduction against any Capital Gains earned.

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