Stay Ahead of the Game: Why Smart Individuals Opt for Advance Tax Payment

Every Indian citizen must pay the applicable taxes if their income falls under the income tax bracket. The government largely depends on tax collection to fund the nation’s development, reform infrastructure, and improve society to shape the economy. According to the tax slabs, India has a tax structure that every individual must follow. If you are a salaried or a self-employed individual and your tax liability is above ₹ 10,000 in a fiscal year, you must pay advance tax instead of a lump sum amount at the year-end. Let’s understand more about advance tax payment and how it benefits smart individuals.

What is Advance Tax? 

Advance tax is the income tax you must pay if your tax liability is more than Rs 10,000 in a fiscal year. You must pay this tax the same year you receive the income. Some individuals also call advance tax the ‘pay-as-you-earn’ scheme for that purpose. The primary purpose of collecting advance tax is to maintain a constant cash flow for the government throughout the year, helping the authorities to meet the expenses easily. 

Who Must Pay Advance Tax?

According to Section 208 of the Income Tax Act, you must pay advance tax if your tax liability exceeds ₹ 10,000 in a financial year. For instance, if your tax liability exceeds Rs 10,000 in FY 2023-24, you must make an advance tax payment in the same year.

The advance tax applies to those with more income sources than their salary. Business people, self-employed individuals, and professionals are liable to pay this tax if they earn more than a certain limit. Their income sources include everything from shares and rent to fixed deposit interests and others. However, senior citizens are exempt from advance tax payment. 

Benefits of Paying Advance Tax

Here is a list of benefits you enjoy with paying advance tax:

• Saves you from the burden of paying a lump sum tax amount at the last moment. 
• Relieves you from the stress of paying taxes at the end of the financial year.
• Ensures timely tax payment, saving you from defaulting and paying unnecessary penalties.
• Raises funds that the government uses for the country’s development. 
• Expedites the procedure of tax collection and payment.
• Helps businesses easily manage their finances by better understanding their annual revenue generation.

Calculating Advance Tax

Follow these steps to calculate your advance tax payment: 

• Estimate your total income during a year other than your salary.
• Subtract expenses like phone costs, insurance premiums, travel expenses, etc., from your earnings.
• Add income from other sources, including your fixed deposits, lotteries, house rents, etc.
• Use an online advance tax calculator to know your tax obligation.
• If the tax amount exceeds ₹ 10,000, you must pay advance tax.

How to Make Advance Tax Payment Online?

Just like paying regular tax, you can also pay advance tax using challan. You may approach your bank to pay your advance tax through a challan. You may also make advance tax payments online from the comfort of your home. These are the steps to follow:

• Visit the official website 
• Choose the relevant challan for advance tax payment, including ITNS 280, 281, 282 or 284.
• Enter your PAN card details with important information like your phone number, bank name, residential address, email address, etc. 
• After entering the required details, you will reach the website’s payment page. 
• Choose your preferred payment method, enter the details, and click Pay.

Exemptions from Advance Tax Payments

These individuals are exempted from advance tax payments:

• Senior citizens above 60 years of age do not need to pay advance tax.
• Salaried employees who fall under the TDS net must not pay advance tax. However, they must pay advance tax on earnings from other sources, including rent, capital gains, interest, and other income sources other than the salary. 
• Paying the advance tax is not required if the TDS exceeds that year’s tax payable.

If you pay more tax than your liability during a fiscal year, the Income Tax Department will refund the excess amount at the year-end. You may request a refund by submitting Form 30.You must have understood everything about advance tax payment in India by now. Therefore, ensure paying your taxes on time to avoid unnecessary penalties and complications. Use your bank’s net banking facility to pay your taxes online and avoid the hassle of offline payments.