Many individual taxpayers tend to assume that advance tax payments are applicable only to businesspersons, companies and corporates.
However, you might have to pay a heavy price for this erroneous perception if you miss paying advance tax by the due date. The second installment for financial year 2024-25 is due on September 15.
The fact is that any individual – including salaried taxpayers - whose estimated tax liability is likely to exceed Rs 10,000 [after considering tax deducted and collected at source (TDS and TCS)] in a financial year has to pay advance tax that year, as per Section 208 of the Income-Tax (I-T) Act, 1961.
This is not applicable to senior citizens who do not draw any income from business or profession.
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The nitty-gritties of advance tax payment
Put simply, it is the tax that you have to pay before the end of the financial year on the income you earned in the same year. I-T rules require you to make the payment in four installments – June 15, September 15, December 15 and March 15 – and not at one go, at the end of the financial year.
In the case of salaried individuals, their employers deduct tax before depositing their salaries at the end of month. However, employers do not take into account other sources of income such as interest from deposits, capital gains made on the sale of shares and mutual fund units and so on. When you estimate your advance tax liability, you need to factor these incomes as well.
| Installments for the financial year | Due date | Advance tax payable |
| First installment | June 15 | 15% of the total tax liability |
| Second installment | September 15 | 45% of the tax liability as reduced by the amount, if any, paid in the earlier installment |
| Third installment | December 15 | 75% of the tax liability as reduced by the amount, if any, paid in the earlier installment |
| Fourth installment | March 15 | 100% of the tax liability as reduced by the amount, if any, paid in the earlier installment |
This is how taxpayers are required to meet their advance tax payment obligations: of the estimated advance tax liability, you have to pay 15 percent on June 15. By September 15, you should have paid 45 percent of the total amount due, 75 percent by December 15 and 100 percent by March 15.
However, if you are a self-employed businessperson or professional who has opted for the presumptive taxation scheme, the rules differ slightly. Even though they too have to pay advance tax, they are allowed payment at one go -- in the last quarter of the financial year, by March 15. This leeway is provided as small businesses may find it difficult to estimate their advance tax liability at the beginning of the financial year.
Also read: Advance tax: Payment due date, penalties for missing the deadline and more
How to pay advance tax
To pay your dues, you need to log in to www.incometax.gov.in. If you haven’t done so already, you need to first register yourself, using your PAN. Next, click on 'e-pay tax' under the 'Quick Links' menu on the left-hand side of the website. Follow the instructions on confirming your PAN, enter the OTP and proceed to select the right assessment year (2025-26 when you are paying advance tax for financial year 2024-25) and 'Advance Tax (100) as the 'type of payment'. Click on 'Continue', enter the details and make the payment to complete the process.
The price of not paying advance tax
Paying advance tax is not optional. If you fail to adhere to the rules, you will have to cough up penalties. You will have to shell out simple interest at the rate of 1 percent per month on the amount of less-than-required payment/non-payment of advance tax by the due date, for the period till the amount is paid.
The penal interest on the deficit amount applies only if the total advance tax paid is less than 12 percent and 36 percent of the advance tax due by June 15 and September 15, respectively. Similarly, penalty will come into play if the advance tax you have paid is less than 75 percent and 100 percent of the due amount by December 15 and March 15, respectively.
If you miss the March 15 deadline, you can still pay advance tax until March 31, but one month of interest as per Section 234C of the I-T Act will be applicable.
However, if you wait until July 31 (due date for filing ITR for the previous financial year) to meet this obligation, the I-T department will treat it as a default in advance tax payment. In such cases, you will have to pay an additional four months’ penal interest (1 percent per month) under Section 234B.
It is best to be cognizant of the due dates and advance tax estimates and clear your dues by the due date to avoid paying hefty penalties later.
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