Advance Tax: Key Things to Know About Advance Tax Payment

Last Updated at: Oct 16, 2020
Advance Tax: Key Things to know about Advance Tax Payment

Advance tax payment is an important aspect of taxation for companies and individuals and is a portion of total tax liability that is paid in advance as per deadlines indicated by the Income Tax authorities. Advance Tax is a way for the government to know the profit and income levels in the economy and get a fair idea of the approximate tax they can expect to collect by the end of the fiscal year.

Who needs to Pay Advance Tax?

All salaried, freelancers and business people need to pay advance tax if your total tax liability exceeds Rs 10,000 in a fiscal year. However, senior citizens – above 60 years of age who do not run a business need not pay advance tax.

People Working under Presumptive Taxes

Taxpayers who are calculating their tax under presumptive tax scheme are required to pay the entire amount of advance tax on a single instalment before the deadline of March 15. They can also pay the entire tax liability by March 31. Professionals who have opted for presumptive tax system need to pay advance tax under Section 44ADA. If you are an independent doctor, lawyer architect or any other skilled professional you can opt for this.

Actual Due dates for payment of Advance Tax – FY 2020-2021

Individual and Corporate Taxpayers

Advance Tax Payable  

Due Date

15% of advance tax less advance tax already paid On or before 15th June 2020
45% of advance tax less advance tax already paid On or before 15th September 2020
75% of advance tax less advance tax already paid On or before 15th December 2020
100% of advance tax less advance tax already paid On or before 15th March 2021


Taxpayers Opting for Presumptive Taxation Scheme – Business Income

Due Date Advance Tax Payable
by 15th March 100% of advance tax


Extended due dates for payment of Advance Tax – FY 2019-20

Honourable Finance Minister Nirmala Sitharaman declared in one of the recent press briefings that the due date for filing Income Tax Return for AY 2020-21 has been prolonged from July / October 2020 to 30th November 2020. The government had also expanded the advance tax collection deadline for FY 2019-20 to June 30th 2020. Extending the last day of submitting federal tax reports was to help those who don’t have to pay deferred tax. However, according to Sameer Mittal, Managing Partner, Sameer Mittal and Associates LLP and Chairman, International Trade Council in India, it is advisable for taxpayers within the advance tax bracket to deposit taxes before June 30 to prevent any interest on tax liability.

He stated that section 234 A / B / C and 234E are mainly sections that cover interest and penalties on delayed taxes in advance tax and income tax returns. He clarified what taxpayers have to comprehend from ITR filing extensions as well as Advance Tax payment dates.

Even as the date of return filing has been prolonged, it was said that interest on advance tax would be charged if not paid before 30th of June. This extension of the return filing date would only give us the respite from interest as per the section 234A and penalty as per the section 234E for the delay in filing income tax returns. Whereas, interest as per section 234B and 234C will continue to be imposed after 30 June for any delay in paying FY 19-20 taxes.

Who can enjoy ITR date extension

If anyone who isn’t within the advance tax category, they will receive an extension relief.

Section 234E, which provides fines for failure in filing income tax returns, does not apply to people who filed their returns past the extended return deadline.

Penalties Imposed on Non-Payment of Advance Tax

Section 234B talks about the penalties and fines to be imposed in case of a default. Delays can also lead to penalties. All self-employed professionals and businessmen need to pay advance tax where the tax payable even after reducing TDS is Rs 10,000 or more.

If you have paid later than the due date or the amount paid is less than 90% of the assessed tax you are liable to pay a penalty. The interest under this section which is applicable is 1% on the Assessed tax deducting the Advance Tax. The month is rounded off to a full month and the amount calculated is also rounded off.

How to Calculate the Penalty?

Consider the below-mentioned example;

Saurabh’s tax liability is more than Rs 10,000 and stands at Rs 40,000. As no TDS was deducted the entire amount is liable. The due date has passed for advance tax and he pays this amount on May 30 while filing his tax. The last date for the advance tax was March 15 which he did not comply with. Thus, the interest to be paid will be as follows –

Rs 40,000 * 2 * 1% = Rs 800. 

Rs.800 is the penalty one must pay.

File Your Tax Returns

Few Important Points Regarding Advance Tax

  • Even NRIs are liable for payment of advance tax on their income in India exceeding Rs 10,000
  • You can consider all deductions like Section 80 C and others while paying advance tax
  • Advance tax payment can be done on both online or offline
  • Even if you miss the March 15 deadline of advance tax, you can pay by March 31 of the year and it will be taken as advance tax
  • You can use Challan 280 to make an advance payment of tax
  • Even if you are a salaried employee but have significant income from other sources like real estate, bullion, stocks and other investments giving you a profit of Rs 10,000 and more, you need to pay advance tax.
  • People filing tax under Presumptive Tax Scheme need to file taxes before March 15.
  • Senior citizens are not only exempted but any income apart from business or profession which is an investment will not fall under this category.
  • Self-assessment tax which people under specific income and professional categories can use is also a type of advance tax.

Advance Tax is an essential part of the economic budget for the income tax department and the government, and it gives them an idea of the profitability of businesses in the system. More well-performing companies mean there would be a higher advance tax. This will translate into more income for the government to spend on different public policies and pay salaries.