How is Advance Tax Calculated? Find Out Here

How is Advance Tax Calculated? Find Out Here

As citizens of the country, we have to pay taxes to the Government under the Income Tax Act, 1961, for one financial year. With the help of taxes paid by the citizens, the Government provides us with upgradation and advancement of infrastructure and technology, facilities such as water and electricity, law and order, the salary of the Government employees, etc. We must have often heard of the term 'advance tax' while paying taxes or even reading about taxes, right? We often face hassle in understanding and knowing all about such aspects conclusively and comprehensively. To ensure that we do not face such inconveniences, we must have well-constructed information on advance tax and how is it calculated.

To help you understand better, we have come up with a definitive guide on advance tax and how it is calculated.

What Do We Mean by Advance Tax?

Advance tax is a form of income tax that has to be paid by the taxpayer in case the tax liability exceeds the amount of Rs. 10,000 in a financial year. In this case, the taxpayer must pay the tax amount in the same financial year so that the Government has a regular flow of income and can manage their expenditure without any hassle.

Salaried individuals do not have to pay advance tax as their employers deduct the tax at source, also known as Tax Deducted as Source or TDS. Let us now see who all are eligible to pay advance tax.

Why Pay Advance Tax?

Paying advance tax offers several advantages:

  • Reduced Year-End Burden: Avoid the last-minute scramble and stress of paying a large sum at year-end.
  • Interest Savings: Timely advance tax payments avoid interest charges levied on late payments.
  • Penalty Avoidance: Consistent advance tax payments ensure compliance, preventing penalties for non-payment.
  • Financial Planning: Paying in installments helps you manage your finances more effectively.
  • Government Benefits: Advance tax payments contribute to crucial government initiatives like infrastructure development and social welfare programs.

Benefits of Advance Tax

  • One of the key benefits of advance tax is that it reduces the burden on the taxpayer to pay taxes at the end moment. It also helps in avoiding interest on tax.
  • With the provision of advance tax, the taxpayer does not have to face any hassles in the future, which might fail to pay the advance tax by the taxpayer. It will further save the taxpayer from facing any penalties due to failure of the advance tax.
  • It is also beneficial for the Government as it acts as an income source to the Government, which helps them carry out their expenses without having to face any constraints.

Who All Are Eligible to Pay Advance Tax?

  • Individuals who have received income from capital gains have to pay advance tax.
  • Individuals who have earned interest via Fixed Deposits or FD have to pay advance tax.
  • Individuals who earn income from the rent of a property have to pay advance tax.
  • Self-employed people, such as business owners, corporate industries, etc., also have to pay advance tax.

Given below is how one can pay the advance tax.

Process of Paying Advance Tax

The taxpayer can pay the advance tax through a few banks that are authorized by the Income Tax Department to collect the advance tax. You can also pay the advance tax online by visiting the official website of the Income Tax Department.

We often face hassle when it comes to calculating advance tax. Read the points below to calculate your advance tax in a seamless and hassle-free way.

How to Calculate Your Advance Tax?

  • The taxpayer has to first calculate the total income he or she has earned through various means, excluding salary in one financial year. The taxpayer has to include income he or she has received from Fixed Deposit (FD), rent of the house, etc.
  • After calculating the total salary, the taxpayer has to deduct certain expenses such as expenses on the internet and phone, expenses incurred on travel, etc.
  • In case the tax calculated by the taxpayer is higher than Rs. 10,000, he or she is then liable to pay advance tax to the Government.

It is always essential to calculate the advance tax that the taxpayer has to pay so that he or she does not face any discrepancies in the future.

It is always recommended to be well-prepared in advance with all forms required for the advance tax. This ensures that the taxpayer can seamlessly pay the advance tax without any hassles.

Forms That Are Required for Advance Tax

  • PAN Details of the taxpayer: Before paying for the advance tax, the taxpayer should carefully incorporate the details of the PAN so that he or she does not face any discrepancies in the future.
  • Correctly Incorporating the Assessment Year: While filing for the advance tax, the taxpayer needs to select the correct assessment year for which he or she has to pay the advance tax. This is because the tax that the taxpayer pays is going out beforehand for the coming financial year.
  • Selecting How the Taxpayer will Pay: The taxpayer who has to pay the advance tax has to choose the payment option in the form. There are 2 payment options.
    • Advance Tax: If the taxpayer is going to pay the tax in the same financial year.
    • Assessment Tax: If the taxpayer will pay the taxes after the end of the financial year.

Stay Informed, Stay Compliant!

Advance tax payment deadlines are staggered throughout the year:

  • 15th June: 15% of estimated tax liability
  • 15th September: 45% of estimated tax liability (minus June payment)
  • 15th December: 75% of estimated tax liability (minus June & September payments)
  • 31st March: Remaining balance to ensure 100% payment

Remember, timely payments are crucial to avoid penalties and interest charges. Keep your records organized and consult a tax advisor if needed

Wrapping Up

It is imperative to have a well-structured and conclusive knowledge about taxes and advance tax in today's time. Moreover, it is also necessary to have brief knowledge about who all are eligible to pay the advance tax, what all forms are required for the same, and how it is calculated. This ensures that the taxpayer does not face any uncertainties or hassles, leading to unnecessary penalties that the taxpayer might have to pay. With the information mentioned above, you must now know all about advance tax and how it is calculated.


*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

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