Advance tax is calculated by estimating the current year income and then applying the tax rates in force. TDS is also deducted to arrive at advance tax liability.
I earn some money from fixed deposits and the bank deducts TDS. But I have to pay more tax at the time of filing returns in July along with interest to the tax department. Can I pay some self assessment tax before March to save on the interest?
– Rohit Kumar Your tax dues must be paid by March 31 of the financial year to avoid any interest levy. Any interest income earned during the year is to be added to your income from any other sources and tax is to be calculated on such total income. Any TDS, which has been deducted by the bank can be adjusted from this tax liability. However, if you have a large amount of interest income, advance tax may be applicable to you and you will have to estimate your quarterly tax dues and pay them as per advance tax timelines. Advance tax is calculated by estimating the current year income and then applying the tax rates in force. TDS is also deducted to arrive at advance tax liability. An assessee is required to pay advance tax if his liability for advance tax is Rs 10,000 or more. So, if you have annual tax dues of more than Rs 10,000, you must pay income tax in advance.
• I have income from salary and agriculture. Do I have to combine both the incomes and pay tax?
—Chandan Mathur Agricultural income is exempt from tax under Section 10. However, for the computation of income tax, agricultural income is aggregated with non-agricultural income if the assessee has non-agricultural income exceeding the taxable limit (i.e. Rs 2,50,000) and has agricultural income exceeding Rs 5,000 and income tax is computed on the sum (say income tax T1). Next, the agricultural income is increased by the first slab of income on which tax is charged at nil rate (i.e. Rs 2,50,000 in case of individual; Rs 3,00,000 in case of resident senior citizen and Rs 5,00,000 in case of senior citizen of 80 years and above) and income tax is calculated on such sum (income tax-T2). Income tax T2 is then reduced by income tax T1 and education cess is added to the amount so obtained. This amount is the amount of income tax payable by the individual.
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