Advance tax is calculated on the estimated total income of the taxpayer for the financial year.
As the second instalment of advance tax payments nears, taxpayers are reminded of their obligation to meet the payment requirement. This instalment marks a critical point in the financial year, where individuals and businesses must pay 45% of their estimated annual tax liability.
The advance tax system, designed to ensure steady revenue inflow for the government throughout the year, mandates certain taxpayers—particularly those with significant income from business, interest, or capital gains beyond salary—to make payments in four instalments.
Missing these deadlines could lead to interest penalties, making it vital for taxpayers to calculate their dues accurately and on time.
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Here’s what you need to know about the second instalment date and other details:
Advance Tax Payment Dates 2024
The first instalment for advance tax for the financial year 2024-25 was June 15th, 2024.
Due Dates for Advance Tax Payments
For individuals and corporations, the advance tax is to be paid in four instalments throughout the financial year, which runs from April to March.
- 1st Instalment: 15th June – 15% of the total advance tax liability.
- 2nd Instalment: 15th September – 45% of the total advance tax liability, minus the amount paid in the first instalment.
- 3rd Instalment: 15th December – 75% of the total advance tax liability, minus the amount paid in the first and second instalments.
- 4th Instalment: 15th March – 100% of the total advance tax liability, minus the amount paid in the first three instalments.
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Who Needs to Pay Advance Tax?
As per section 208, 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’.
- Individuals: Any individual whose estimated tax liability for the year is Rs 10,000 or more is required to pay advance tax.
- Corporates: This applies to all types of companies, including public limited companies, private limited companies, and one person companies.
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Calculation of Advance Tax
Advance tax is calculated on the estimated total income of the taxpayer for the financial year. This includes income from all sources, such as salary, business, profession, capital gains, etc. Here are the steps:
- Estimate your total income for the financial year.
- Calculate the income tax on this estimated income as per the applicable income tax rates.
- Deduct the tax deducted at source (TDS) and any other credits from the estimated tax liability.
- The balance amount is the advance tax that needs to be paid.
Tax experts advise individuals and entities to review their financial statements and income projections carefully, ensuring they have accounted for any changes in earnings or deductions. With an increasing number of taxpayers using online payment methods, meeting the compliance requirements has become easier, but vigilance remains essential to avoid any last-minute rush or errors.
