If a taxpayer fails to pay advance tax by the due date, he will have to pay interest on the amount of tax that is due under Sections 234B and 234C of the Income Tax Act, 1961
The deadline for the second instalment of advance tax for the assessment year 2024-25 is Friday, September 15, 2023. Those whose estimated tax liability for the year is Rs 10,000 or more will have to pay advance tax.
What Is Advance Tax and Who Needs to Pay It?
Advance tax is the amount of income tax that is paid in advance rather than at the end of the year. According to Section 208 of the Income Tax Act, 1961, every person whose estimated tax liability for the year is Rs 10,000 or more, shall pay his tax in advance, in the form of ‘advance tax’.
In other words, if the estimated tax liability of the taxpayers is Rs 10,000 or more, then they have to discharge tax liability in the form of advance tax, to be paid in different instalments. Those who are required to pay advance tax are salaried employees, self-employed individuals, businesses, trusts, and partnerships.
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Instalments Of Advance Tax
Advance tax needs to be paid in 4 instalments in a year. In the first instalment, 15 per cent of the advance tax needs to be paid on or before June 15. In the second instalment, 45 per cent of the ‘advance tax less advance tax already paid’ has to be paid on or before September 15 of the year, the third instalment (75 per cent of the advance tax less advance tax already paid) shall be paid on or before December 15, the fourth and final instalment of advance tax needs to be paid on or before March 15 (100 per cent of the advance tax less advance tax already paid).
Importantly, those taxpayers who have opted for a presumptive taxation scheme under Section 44AD or 44ADA will have to pay the entire advance tax in one go on or before March 15.
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Who Does Not Need To Pay Advance Tax?
Senior citizens who are above the age of 60 and do not have any income from business or profession are excluded from paying advance tax.
Penalty For Not Paying Advance Tax
If a taxpayer is liable to pay advance tax but fails to do so by the due date, he or she will have to pay an interest penalty at the rate of 1 per cent on the amount of tax that is due under Sections 234B and 234C of the Income Tax Act, 1961.
