Advance tax needs to be paid in advance instead of at the end of a financial year. Learn who needs to pay it and how, and other important details about advance tax payment.
Advance tax refers to income tax paid in advance instead of the entire amount at the end of the financial year. It is also known as “pay as you earn.” This blog explains how you can make your advance tax payment conveniently.
How To Make Advance Tax Payment, And Who Needs To Pay?
Anyone whose expected tax liability per year exceeds Rs.10,000 is required by Section 208 to pay their tax in advance within the stipulated deadlines. As per section 207, a permanent retiree (over the age of 60) without a source of income is not required to pay advance tax.
Salaried individuals, contractors and enterprises earning high income from sources outside of their regular income must pay advance income tax after compensating for expenses or losses.
The Income Tax Department issues tax payment challans that can be used to pay advance tax at authorised bank branches. HDFC Bank, ICICI Bank, Reserve Bank of India, Syndicate Bank, SBI and Allahabad Bank are some of the authorised institutions.
Who Is Eligible For Advance Tax Payment?
The following are the eligibility criteria for paying advance tax:
- Your estimated tax liability is Rs 10,000 and above.
- You have earned capital gains from the sale of stocks.
- You have won money in a lottery.
How Do I Make An Online Advance Tax Payment?
The advance tax is paid electronically to the income tax department. Follow the steps below for effortless online advance tax payment.
- Visit the TIN NSDL portal for e-payment.
- To pay advance tax, select challan 280.
- On the next screen, fill out the details required. Tax Applicable will be (0021) Income Tax (other than companies) and the type of payment will be (100) Advance Tax.
- Select the mode of payment. You can use a Debit Card or Netbanking facility provided by your bank.
- Enter your PAN details along with other personal details required such as e-mail and phone number.
- Select the assessment year for which you want to pay advance tax and click on proceed.
- Once you make the payment, you’ll receive the challan copy with your bank details which you can save for future reference.
Advance Tax Challan 280?
People can use Challan 280 to epay taxes directly on the income tax department’s website. You need to choose this challan on the website, submit the form and then pay the advance tax amount online or in person. If you wish to pay in person, you must print the Challan 280 document from the Income Tax Department, fill it out and submit it to the bank.
Advance Tax, Late Payment, or Interest?
If you fail to pay an advance tax payment of less than 90% of your assessed tax, you will be charged 1% interest each month until the tax is paid in full. The interest rate is computed at 1% per month on the delinquent amount until the tax is completely paid.
If you do not pay your advance tax instalment, you will be assessed a 1% interest rate under Section 234C of the Income Tax Act.
What Are The Benefits Of Paying Advance Tax?
- Paying an advance tax might help individuals relax. If you pay your taxes in advance, you won’t have to worry about future money constraints or late payments.
- It facilitates the timely collection of taxes.
- It boosts government funds because it can receive interest on the money collected.
- It assists organisations in effectively managing their finances and estimating their annual revenue.
Refund For Tax Payment In Advance?
Taxpayers who paid more tax than they should have will be reimbursed if they file a claim within one year at the end of the year.
Advance income tax payments benefit both the state and the citizens. Taxpayers benefit since they do not have to worry about paying a huge amount all at once because the tax is collected in convenient instalments. The procedure also improves the state’s revenue by speeding up the collection process and accruing interest on the amount collected.
NRIs with a tax liability of over Rs. 10,000 must pay advance tax.
Users have till March 31 to submit their fourth instalment payment if they skip the due date on March 15.
The difference between the advance tax paid and the total tax liability will be refunded. If the advance amount surpasses 10% of the tax bill, the IT Department will pay 6% interest each year.
The most convenient way to pay your advance tax is online through internet banking on the income tax department’s website.
The advance tax is determined by multiplying the expected yearly income by the applicable slab rate. For example, if your entire income was Rs. 5,50,000 in 2018-19, your estimated tax liability is Rs. 23,400.
TDS payments are one of the government’s most stable revenue streams. The tax collection base is enlarged because practically everyone is obligated to pay TDS somehow. Individuals also find it easier to pay tax online because TDS is deducted from their wages regularly.
Advance tax can be paid using the challan ITNS 280 with the minor head code 100 and the major head code 0020 for tax on corporations and 0021 for tax on non-corporations.