Recognizing Advance Tax Payment | The difference between the ordinary tax that is paid at the end of the fiscal year and the advance tax that must be paid on expected income is that the advance tax must be paid in advance. In this piece, we will discuss the fundamentals of advance tax, including the process that must be followed in order to calculate and pay it.
What exactly is advance tax?
Advance tax means paying income tax throughout the year instead of all at once. Pay-as-you-earn tax. The assessee must pay these installments by the Income Tax department’s due dates.
If your annual income tax exceeds INR 10,000, you must pay it. It must be paid in the income year.
Advance tax collection helps the government collect taxes evenly throughout the year. The government collects TDS from people. Certain non-taxpayers can get TDS refunds. TDS may also be less than tax liability. If so, deposit it.
Taxpayers can pay online or offline. Offline transactions need tax payment at authorized bank locations. Taxpayers can pay it online through NSDL.
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Who needs to pay taxes in advance?
Employees, independent contractors, and companies all
The taxpayer is required to make an advance tax payment if their annual liability is expected to be greater than INR 10,000. Advance tax payments are required from all taxpayers, whether they are self-employed, salaried, or a business. Those over the age of 60 have been given a special dispensation. Those 65 and older who are not self-employed are free from paying taxes in advance.
Estimated Profits for Companies
Presumptive taxes under Section 44AD is rarely chosen by taxpayers. Those taxpayers must make a lump sum payment covering the whole advance tax due by March 15th. Some people may choose to settle their whole tax obligations by March 31.
Income Assumption for the Professions
Presumptive income under section 44ADA is opted for by professionals such as lawyers, doctors, architects, etc. On or by March 15th, such taxpayers must pay the whole sum due. Some people may choose to settle their whole tax obligations by March 31.
Seniors are exempt from making an advance tax payment.
The Income-tax Department ratified section 207 in the fiscal year 2012-2013 with the intention of simplifying tax compliance for the elderly. Hence, older citizens are exempt from paying advance tax if the following conditions are met:
- The taxpayer is older than sixty
- This person currently resides in India.
- A taxpayer does not have any “business or profession” income.
- At any moment throughout the tax year, the taxpayer meets the definition of a senior citizen. If you become 60 years old within the fiscal year, for instance, you won’t have to pay any taxes in advance.
How is advance tax calculated?
Determine a rough income tax amount
You must first estimate your taxable income for the fiscal year in order to determine the advance tax. All forms of income are counted, such as wages, dividends, interest, rent, and earnings from a business.
Determine your tax obligations.
Your annual tax bill can be computed using the income tax rates and slabs in effect as well as your best guess about your taxable income for the year. You can find tax calculators online or talk to a tax expert to figure out how much you owe in taxes.
TDS must be subtracted from your tax bill.
You can reduce the amount of tax you owe by the amount of tax withheld at the time of payment (known as “tax deducted at source,” or “TDS”). Salary, interest, and other taxable income and payments are all included.
Estimate your tax bill in advance.
Your annual tax bill can be computed using the income tax rates and slabs in effect as well as your best guess about your taxable income for the year. You can find tax calculators online or talk to a tax expert to figure out how much you owe in taxes.
TDS must be subtracted from your tax bill.
You can reduce the amount of tax you owe by the amount of tax withheld at the time of payment (known as “tax deducted at source,” or “TDS”). Salary, interest, and other taxable income and payments are all included.
Spreading out the advance tax payment over time
In order to make your advance tax payment, you will need to determine your advance tax liability and then split that amount into four equal payments, with each payment falling on one of the days specified by the Income Tax Department.
The 15th of June, 15th of September, 15th of December, and 15th of March are the typical due dates for payments of taxes payable in advance. Typically, the installments are 15 percent, 45 percent, 75 percent, and 100 percent of the advance tax liability, respectively. The payment of the advance tax can be made in its entirety or in installments, whichever option is more convenient for you.
Methods of Making an Advance Tax Payment
Payment Methods
When making an advance tax payment, you can choose from the following options:
- Payment in cash at certain banks
- Payment by check at certain banks
- You can pay online with net banking.
- You can use a debit or credit card to pay online.
- Electronic Fund Transfer on a National Level (NEFT)
- Gross Settlement in Real-Time (RTGS)
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