What is Advance Payment of Tax? And Calculation on Advance Payment of Income Tax

Introduction

The need to pay Income Tax for income earned during the same Financial Year is referred to as Advance Payment of Tax. In general, taxpayers are only obligated to pay tax on their previous year’s earnings. If the tax due is more than ten thousand rupees, the tax must be paid to the government before the due date specified in the Act. The inclusion of Advance Tax provisions in the Act is intended to ensure that income reaches the government as soon as possible. This article includes information on “What is Advance Payment of Tax?”, and information on Tax Advance Payment.

What is Advance Payment of Tax?

The amount of income tax paid in advance rather than in a lump-sum payment at the end of the year is referred to as an advance tax. Advance tax, sometimes known as earn tax, is paid in installments according to the deadlines set by the IT (Income Tax) Department.

Calculation on Advance Payment of Income Tax

• If the amount of advance income tax payable during any financial year exceeds ten thousand rupees, the assessee is required to pay advance income tax in respect of the taxpayer’s total income for that financial year.

• The amount of advance income tax payable by an assessee in a financial year must be estimated in the way provided. The assessee must first estimate his or her total income and then compute the income tax due on that whole income. The tax liability should be estimated using the rates that were in effect at the time. Secondary and higher education cess should be included in the tax payable. Surcharges should also be included. The assessee should be aware that the surcharge is based on a percentage of income tax, whereas the cess is based on the sum of income tax plus surcharge.

• The amount of income tax that would be deductible or payable at source during the financial year from any income that is taken into account in calculating the total income will be subtracted from the income tax estimated in the preceding stage. In addition, a deduction shall be made for the amount of credit obtained under Section 207, which is authorized to be set off in the fiscal year.

• The Advance Income Tax Payment will be the balance of the Income Tax due.

• Any person other than a firm must pay advance income tax in three installments during the financial year, on or before the stipulated dates.

Information on an entity that are liable for Tax Advance Payment

To be eligible to pay advance tax, you must meet the following criteria:

• Your tax due should be at least Rs.10,000.

• Gains on stock investments might be used to supplement your income.

• You should either be employed or self-employed.

• Fixed deposit interest is earned.

• A lottery winner’s winnings.

• Rent is a term used to describe the money generated by residential property.

A process on “How to Pay Advance Tax Online?”

• Visit the NSDL e-government Portal, the official government website.

• Click on Services, from their click on e-payment: Pay taxes online

• To pay your income tax, choose the appropriate challan (Advance tax)

• Complete the form with the right information.

• You’ll need to fill in information like the correct assessment year, captcha code,  phone number, email address, address,  bank name, and other pertinent information.

• You will be forwarded to the bank’s Net Banking website once you have completed the form. This page should be double-checked so that if there is any error can be rectified.

• After that, you’ll get payment information, including your challan number.

• It is critical that you declare your payment once you have made it. To do so, go to the paid tax page and make a new entry.

Exemption for Senior Citizens For Advance Payment of Tax

A resident senior citizen (one who is 60 years or older) who do not have any income from a business or profession is not required to pay advance tax, according to Section 207 of the Act. An older citizen, for example, may have a variety of sources of income, including rental income, pensions, interest from bank savings, and dividends. Because these forms of income do not fall under the income tax head of income from business or profession, senior adults do not have to pay advance tax. This exemption is also available regardless of how much money a senior citizen receives from sources other than business or profession.

Conclusion

Try to think of advance tax as an EMI to the IRS, which will eventually allow you to pay your income tax without fear. Similarly, use advance tax payment as an opportunity to get ahead of your tax obligations so that you are not left worrying about how much you owe the IRS at the end of the year. You will also avoid fines for not paying your taxes in advance. Furthermore, even as the government obtains advance tax money from you, which is then utilised to construct the country’s infrastructure, you could contribute in your own modest manner to nation building.