Advance Tax payment deadline soon: What is it? Who needs to pay advance tax? What happens if you miss due date?

Advance Tax Payment: If you earn income other than your salary or have multiple sources of income, you must keep in mind that the deadline to pay advance tax is approaching. Missing the payment of advance tax or its underpayment can lead to penalties that can quietly accumulate over time and then hit you all at once during the end of the tax year.

The Income Tax Act, 1961, follows a pay as you earn approach, and therefore it is important to strictly adhere to the Advance Tax payment deadline on 15 March. But before that, understanding advance tax and how it needs to be paid is important so that you do not make any mistakes.

Here is everything you need to know about what is advance tax, when is advance tax deadline, what are the penalties for missing advance tax deadline and more.

What is advance tax?

The scheme of advance tax requires every taxpayer to estimate their current income. If the tax liability on this estimated income exceeds the specified limit, the taxpayer is required to pay the estimated tax in instalments during the financial year itself.

Thus, the taxpayer is required to pay tax as he earns and therefore the scheme of advance tax is also known as 'Pay as you Earn Scheme'.

It is paid through four instalments over a financial year, at the end of each quarter. Its provisions are covered under section 207 to section 219 of the Income tax act.

Taxpayers are required to calculate the estimated total income at the start of the financial year, thereby providing an estimate of the tax liability. The advance tax payment is made through a certain percentage over the four instalments.

Any tax paid, on or before 31 March, is also treated as advance tax paid during the financial year.

What is the deadline for advance tax payment?

There are different deadlines for the different instalments of advance tax payment. The four advance tax payment deadlines are as follows —

• 15 June - 15% of tax liability
• 15 September - 45% of tax liability minus advance tax already paid
• 15 December - 75% of tax liability minus advance tax already paid
• 15 March - 100% of tax liability minus advance tax already paid

Who needs to pay advance tax?

Advance tax is required to be paid by anyone whose annual tax liability crosses ₹10,000 after TDS. This includes salaried taxpayers, freelancers, businesses and professionals.

“Every person, whose estimated tax liability for the Financial Year is ₹10,000 or more, shall pay his taxes in advance in the form of advance tax. However, a resident senior citizen (i.e., an individual of the age of 60 years or above) not having any income from a business or profession is not liable to pay advance tax,” as per the Income Tax Department.

What happens if you miss advance tax payment deadline?

If advance tax payment deadline is missed, taxpayers may be subject to:

(a) Interest under section 234B for default in payment of advance tax

(b) Interest under section 234C for deferment of payment of advance tax.

Under Section 234B, interest for default in payment of advance tax is levied at 1% per month or part of a month. This is a simple interest. If the advance tax instalments are not paid within the specified due dates, interest at 1% per month is payable under Section 243C as well.

How to pay advance tax online?

Advance tax can be paid online without logging into the income tax portal.

• Visit the e-filing portal of the Income Tax Department.
• Under Quick Links bar, click on the e-Pay tax option.
• Enter your PAN and re-enter it. Enter your linked mobile number and continue.
• Enter the 6-Digit OTP you have received on your phone and click Continue.
• Select ‘Income Tax’ and click on Proceed.
• Enter the relevant assessment year and choose the ‘Type of Payment’ as ‘Advance Tax (100)’. Then click on 'Continue'.
• Enter all your details as required, select your payment method, select your bank and then click Continue.
• Preview the challan details and click on ‘Pay Now' option. Make edits if required.
• After the payment is done, you will get an acknowledgement receipt. Save this for future reference.