Advance tax means Income Tax should be paid in advance instead of lump sum payment at year end. It is also known as pay as you earn tax. These payments have to be made in instalments as per due dates provided by the income tax department.

Advance tax is the income tax payable if your tax liability exceeds Rs 10,000 in a financial year. Advance tax should be paid in the year in which the income is received.

Advance tax is applicable when an individual has sources of income other than his/her salary. For instance, if one is earning through capital gains, interest on investments, lottery, house property or business, the concept becomes relevant.

*Notes: For the purpose of Advance Tax calculation firstly we will have to find out estimated net income during the financial year than after we should check that his/her tax liability exceed Rs 10,000/- or not. If exceeds than we will have to pay advance tax amount as per Advance Tax rule in Income Tax Act.

Due Dates for payment of Advance Tax

FY 2019-20 & FY 2020-21 for both individual and corporate taxpayers

Due Date Advance Tax Payable
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax less advance tax already paid
On or before 15th December 75% of advance tax less advance tax already paid
On or before 15th March 100% of advance tax less advance tax already paid

For taxpayers who have opted for Presumptive Taxation Scheme under section 44AD & 44ADA – Business Income

Due Date Advance Tax Payable
 On or before 15th March 100% of advance tax

We will explain the calculation by way of an example. Mr. Thakur is a freelancer earning income from the profession of Teaching. For the FY 2019-20, Mr. Thakur estimates his annual gross receipts at Rs 25,00,000. Mr. Thakur estimates his expenses at Rs 16,00,000. Mr. Thakur has deposited Rs 50,000 in PPF account. Mr. Thakur has also paid Rs 35,000 towards LIC premium. Further, Mr. Thakur has paid Rs 15,000 towards medical insurance premium. The professional receipts of Mr. Thakur are subject to TDS. Mr. Thakur estimates a TDS of Rs 50,000 on certain professional receipts for the FY 2019-20. Besides professional receipts, Mr. Thakur estimates an interest of Rs 50,000 on fixed deposits held by him. Mr. Thakur’s advance tax liability would be as below:

INCOME ESTIMATION FOR ADVANCE TAX AMOUNT (Rs) AMOUNT (Rs)
     
Income from profession:    
Gross receipts 25,00,000  
Less: Expenses 16,00,000 9,00,000
     
Income from other sources:    
Interest from fixed deposit   50,000
GROSS TOTAL INCOME   9,50,000
Less: Deduction under section 80C    
Contribution to PPF 50,000  
LIC premium 35,000  
  85,000  
Deduction under section 80D 15,000 1,00,000
TOTAL INCOME   8,50,000
     
TAX PAYABLE   82,500
Add: Education Cess @ 4%   3,300
    85,800
Less: TDS   50,000
TAX PAYABLE IN ADVANCE   35,800
ADVANCE TAX PAYMENTS  
Due date Advance tax payable Amount (Rs)
15th June 15% of Advance tax 5,370
15th September 45% of Advance tax 16,110
15th December 75% of Advance tax 26,850
15th March 100% of Advance tax 35,800

Advance Tax Payment Online

There are following steps of Advance Tax Payment:

*Note: Tax applicable – If company the select 0020 or if Other than Companies then select 0021 then select 100 (Advance Tax) then mode of payment then fill PAN No., Assessment Year and full address.

  • Step 4: Enter the captcha code and click “Proceed”. The name on your PAN would appear.
  • Step 5: Click “Submit”.
  • Step 6: You will be redirected to the Net Banking page of your bank.
  • Step 7: Double check the information before you make the payment.
  • Step 8: You will get a receipt after the payment is successful. Save a copy or take a screenshot of it.

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