AMA: All About Advance Tax

Advance Tax is a part payment of your tax liability before the end of the financial year. Another name for it is – “pay as you earn scheme” where the income tax should be paid in the year in which the income is received.

Budget 2021 announced that Advance Tax liability would arise on dividend income only once the dividend is declared or paid.

#AskMeAnything on Advance Tax, we will be glad to answer all your queries!

You can use the calculator to know your Advance Tax Liability. :point_down:

Read more about Advance Tax here:

Feel free to reach out to us on Whatsapp at +91-7575831310 in case you have any questions! Or you can get in touch with us here.

Hello,

I am earning profits from the month of April of this Financial Year and for example, let’s say my total taxable income would be around 12L for this year. My question is, do I need to pay any advance tax at any intervals of this FY or just paying actual tax during the ITR filing in June or July is enough?

Hey @Shweta_Saini

Advance tax is a ‘Pay as you earn’ tax, so it is required to be paid during the financial year in four different instalments in case your Taxable Liability is more than INR 10,000 for the financial year which stands true for you.

The due dates for advance tax installments are:

  • 15th June - 15% of the tax liability
  • 15th Sept - 45% of the tax liability
  • 15th Dec - 75% of the tax liability
  • 15th March - 100% of the tax liability

If you are eligible to pay advanced tax but have not paid advance tax, the penalty will be applicable u/s 234B and 234C.

Let us know if you have any further questions!

Hi Team, I had assumed that I will be able to pay advanced tax before March because I thought I could go for presumptive tax filing. But now it looks like I cannot opt for a presumptive taxation scheme. So does it mean that I did not pay the advanced quarterly tax that I was supposed to pay?

If yes, what is the penalty in every case or are there some exceptions to avoid this interest penalty?

Thanks in advance!

Hey @riya_gupta

You will be charged an interest penalty under section 234C for the delay/non-payment of advance tax during the year @1% per month on the shortfall amount. Additionally, under Section 234B a penalty interest is imposed on the taxpayers in case the advance tax payment is less than 90% of assessed tax liability during the year.

You can avoid interest u/s 234B by paying at least 90% of your assessed tax liability by March 15, 2021.

Hope this helps!

Hey @TeamQuicko

I have LTCG of more than 7 lakhs from the equity for this year. Is there a way to reduce my tax liability? Also, do I have to pay the tax in advance? If I fail to do so, what will be the penalty/interest percentage I have to pay during my tax filing in 2020?

Hey @ViraajAhuja47, you can set off against non-speculative business loss like F&O for the current year. Long-term capital losses for the previous as well as the current year. Yes, you are required to pay advance tax in case your tax liability is more than INR 10,000 for the FY. The penalties for non-payment of advance tax are:

Non-payment of Advance Tax u/s 234B 3: Interest at 1% in case the taxpayer fails to pay 90% of the tax liability in the same FY
Delay in Payment of Advance Tax u/s 234C 1: if there is a delay in tax payment than interest @ 1% is applicable.

Hello,

If an fno traders pays 100% of advance tax by 15 March based on profit made till date and after 15 March if he makes additional profit, how tax on profit made after 15 March will be paid? Will there be any penalty?

Hello @S_P

Tax paid on or before 31/03/2021 will be considered as advance tax for FY 2020-21. So a trader can determine the profits between 15th March to 31st March and pay the tax on 31st March, there will be no interest levied.

Hope this helps!

In my case total turnover is 70lakh and gross profit is -1000

I do not want to carry forward this loss.

  1. Is Audit required?

  2. Do I still need to file ITR for the same?

Looking forward to your reply.

Hi @TEst_Netflix,

Tax audit is applicable when:

  1. Turnover is above the threshold limit
  2. Profit is >=6% of the turnover

You can use this tool to determine if tax audit is applicable to you:

It is always a good practice to file your ITR and report all your financial transactions to avoid notice from the Income Tax Department. Especially after the SEBI and CBDT’s data partnership. If your total income is below the basic exemption limit, you won’t have any tax liability.

Do I have to pay Advance Tax if the TDS for the year is sufficient to cover tax liabliltiy?

Does Dividend on equity shares attract separate Advance Tax or is it just another source of income?

Hi @vivek25,

You are liable to pay advance tax if your total outstanding tax liability for the financial year after TDS is above INR 10,000.

To calculate your advance tax liability you need to add your estimated income for the financial year from all sources including - Salary, House Property, Capital Gains, Business & Profession and other sources.
Next, subtract all eligible deductions, expenses, and Tax Credit available to you.
Now, if your outstanding tax liability is above INR 10,000, you need to pay advance tax to avoid penalty u/s 234B and 234C.

Hope this answers your query :slight_smile:

You can also use the advance tax calculator to know your advance tax liability under the old and new tax regime

1 Like

Hi
When I pay the advance tax through the ZERODHA-QUICKO platform, does it get saved/stored? For example I have paid for Q1. so when I have to pay for Q2, will this be automatically calculated?
Thanks

I have paid the Advance tax of Q1, but didn’t received any email from income tax portal! So, Is that normal? I received the Challan No. receipt, but no email from IT portal!

@Aakash_L can you help with this?

Hey @Gaurav,

Once you pay the Advance Tax, you have an option to download the challan. In case you missed downloading it, the tax credit for the same will be reflected in your Form 26AS.

1 Like

Hey Girimon_Vasudevan,

When you pay advance tax through our tax planner app, you should download the challan and then you
need to add the it the advance tax toggle under the tax credits in the tax planner tab to see your tax credits reflected in the appropriate quarter.

1 Like

@Nireka
Thanks. I have done it for the current year.
I did not do it for the last year. How can I add it now?

Hi @Girimon_Vasudevan,

If you missed paying advance tax last year, then the interest penalty may be applicable u/s 234B & 234C.
You can pay that as along with your self-assessment tax the filing your Income Tax Return