We often hear about businesspeople or movie stars paying advance taxes amounting to crores of rupees. The deadline for paying advance tax for Financial Year 2024-25 is March 15. According to the law, individuals with a total tax liability of more than Rs 10,000 for the year must pay advance tax accordingly.

 

How to calculate and pay advance tax?

 

Calculating and paying advance tax involves a series of steps and it's important to do it accurately to avoid penalties. Here's a breakdown:

Calculating advance tax:

 

Estimate your income:Begin by estimating your total income for the financial year. This includes income from all sources: Salary, business, profession, capital gains, rent, interest, and any other income.

 

Deduct eligible deductions:Apply all eligible deductions and exemptions under the Income Tax Act. This could include deductions under Section 80C, 80D, and others, depending on the tax regime you've chosen. Remember the differences of deductions allowed in the old and new tax regimes.

 

Calculate tax liability:Calculate the tax payable on your estimated taxable income based on the applicable income tax slab rates.

 

Deduct TDS/TCS:Deduct any Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) that has already been deducted from your income.

 

Determine advance tax payable:

 

If the resulting tax liability exceeds Rs 10,000, you are required to pay advance tax.

 

Divide your advance tax liability into the prescribed instalments and pay accordingly: 15 per cent by June 15, 45 per cent by September 15, 75 per cent by December 15, and 100 per cent by March 15.

 

Ritika Nayyar, partner at Singhania & Co., said missing advance tax payments can lead to financial consequences, primarily in the form of interest charges. Here's a breakdown, according to Nayyar:

 

Interest under Section 234B:It applies when a taxpayer fails to pay at least 90 per cent of their total tax liability as advance tax. Interest is charged at 1 per cent per month or part of a month on the shortfall, from April 1st of the assessment year until the date of payment.

 

Interest under Section 234C:This section deals with the deferment of advance tax instalments. If you fail to pay the required percentage of advance tax by the specified due dates (June 15, September 15, December 15, and March 15), you'll be liable to pay interest at 1 per cent per month or part of a month on the deficient amount.

 

How to pay advance tax?

 

Go to the Income Tax Department e-filing portal.

 

Click on the ‘e-Pay Tax’ option in the ‘quick links’ section.

 

Enter your PAN and mobile number, then verify them by entering the OTP sent to your phone.

 

Select the appropriate tax category under ‘Income Tax’.

 

Select payment type and fill in the tax amounts you need to pay.

 

Select your preferred method (Net banking, debit/ credit card, UPI).

 

Review the challan details and click 'pay now' to complete the transaction.

 

Download and save the tax receipt for your records.