The third instalment of advance tax for the financial year is due on 15 December; 75% of advance tax liability has to be paid by this date. Evaluate your advance tax liability and make sure you pay the advance tax instalment before the due date to avoid penal interest. Here’s when and how much one needs to pay as advance tax.

Who has to pay?

If your total estimated tax for the year is expected to be more than 10,000, you need to pay advance tax. “All incomes earned till the date of calculation of advance tax and which are certain to be earned by the person during the relevant financial year are taken on an estimated basis for the payment of advance tax," said Sandeep Sehgal, director, tax & regulatory, Ashok Maheshwary & Associates LLP, a chartered accountancy (CA) firm.

However, “a resident senior citizen (an individual of age 60 years or above), not having income from business or profession is not liable to pay advance tax," said Rakesh Nangia, managing partner, Nangia Advisors LLP, a CA firm.

Also, if salary is your only source of income, you are not required to pay advance tax as employers deduct tax at source before paying salary. However, if you are a salaried employee but also have other sources of income, such as rent from a property or interest from bank deposit or capital gains and so on which has not been declared to the employer, you need to pay advance tax if the total tax liability on these income sources exceeds 10,000 a year.

“Capital gain is considered for advance tax calculation only when it is actually earned," said Sehgal. For instance, if capital gain is earned on 1 October 2018, then such income being uncertain at the time of calculating the first and second instalments of advance tax, is included at the time of calculation of the third and fourth instalments only, explained Sehgal.

When do you pay?

Advance tax has to be paid in four instalments. The first is due on 15 June each year, by when you have to deposit 15% of the tax liability. By 15 September, you should have paid 45%, by 15 December 75% of the income tax and by 15 March 100% of it.

You can consider deductions under Chapter VI-A for investments made during the year before calculating your advance tax liability- Sandeep Sehgal, Director, tax &regulatory, Ashok Maheshwary &Associates LLP

However, if you file your income under presumptive taxation scheme, you need to pay the entire advance tax in a single instalment on or before 15 March.

How do you pay?

You can pay advance tax online as well as offline. To pay it online, you can log into the income tax website, incometaxindia.com, and click on the “e-Payment of Taxes" tab, which will direct you to the website to make the payment. You can also get to the tax payment website directly at tin-nsdl.com. Here, under the “Services" tab, you will find the “e-payment" option. To pay advance tax, select Challan 280. Once you put in the required details, you can choose the Netbanking option to pay online.

On successful payment, a challan counterfoil will be displayed containing the challan information number, payment details and bank name through which e-payment was made. This counterfoil is proof that payment has been made.

To pay offline, you have to go to designated bank branch and fill the challan form and pay the taxes.

Things to remember

While paying advance tax, the assessee is not required to submit any estimate or statement of income to the authorities. However, while calculating tax liability, “it is allowed to consider deductions under Chapter VI-A for the investments to be made by the taxpayer during the year before calculating advance tax liability," said Sehgal. Chapter VI-A deductions includes deduction under Sections 80C, 80D and so on.

If there is a change in expected income after you have paid advance tax, you can revise the amount of advance tax in the remaining instalments according to the new tax liability estimate.

If you fail to adhere to the advance tax schedule, you will have to pay interest on the due taxes. “Interest under section 234B of the Act shall have to be paid if total advance tax paid is less than 90% of the assessed tax or if the entire advance tax has not been paid. Interest at the rate of 1% per month from the beginning of the assessment year till the payment thereof shall have to be paid on account of such default," said Nangia.

If you need to pay advance tax and haven’t paid the instalments already, do it now.

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