Introduction
Advance tax is a system of paying taxes in India in advance, rather than paying them all at the end of the financial year. It is a form of self-assessment tax, where individuals, companies, and firms estimate their tax liability and pay it in instalments throughout the year. The advance tax system was introduced to ensure a regular inflow of tax revenues to the government. Also, to reduce the burden of paying a large sum of tax at the end of the financial year.
Continue reading the blog and get to know everything about the concept of Advance Tax.
Who is liable to pay Advance Tax?
The Advance Tax system applies to all taxpayers whose estimated tax liability for the financial year is more than Rs.10,000. This includes individuals, companies, and firms. The tax liability is calculated on the basis of the income earned in the financial year, including salary, business income, capital gains, and any other sources of income. The provision of Advance Tax is covered under Section 208 of the Income Tax Act.
Person not liable to Pay Advance Tax
Given under Section 208 of the Income Tax Act, taxpayer having tax liability more than Rs. 10,000 shall be liable to pay Advance Tax. However, there is an exception. If a resident of India is a senior citizen ( above 60 years of age) does not have any income from business or profession is not liable to pay advance tax.
Due Date for Payment of Advance Tax
Under the advance tax system, taxpayers are required to pay their taxes in installments, which are based on the estimated tax liability for the year. The due dates for payment of advance tax are as follows:
| 15% of the estimated tax liability by 15th June |
| 45% of the estimated tax liability by 15th September |
| 75% of the estimated tax liability by 15th December |
| 100% of the estimated tax liability by 15th March |
If a taxpayer fails to pay the advance tax on time, they may be liable to pay interest under section 234B and 234C of the Income Tax Act. The interest is charged at the rate of 1% per month for every month of delay in payment of advance tax.
Where to make Advance Tax Payment?
Advance tax payments can be made online through the income tax department’s website or at designated banks. Taxpayers can also use the online tax payment facility provided by the National Securities Depository Limited (NSDL) and the Tax Information Network (TIN).
Form to file for Advance Tax Payment
The form that needs to be filed for making advance tax payment in India is Challan No. ITNS 280. This is a common form for the payment of income tax, including advance tax. Taxpayers can download this form from the income tax department’s website or obtain it from designated banks. The form requires taxpayers to provide their personal details, an estimate of income, and the amount of tax to be paid. Once the form is filled, the taxpayer can make the payment online or offline at designated banks. It is important to ensure that the correct details are filled in the form to avoid any errors or penalties.
Benefit of Paying Advance Tax
Benefits of Advance Tax Payment to Taxpayers
The advance tax system has several advantages for both taxpayers and the government. For taxpayers, it ensures a regular outflow of taxes throughout the year, which reduces the burden of paying a large sum of tax at the end of the year. It also helps taxpayers to plan their finances better and avoid any last-minute tax liabilities.
Benefit of Advance Tax Payment to Government
For the government, the advance tax system ensures a regular inflow of tax revenues, which helps in the efficient functioning of the government and the provision of public services. It also helps in the early detection of tax evasion and non-compliance, which can be dealt with more effectively.
Summary to Advance Tax
In a nutshell, an advance tax system is an important tool for tax compliance in India. It helps taxpayers to plan their finances better and reduces the burden of paying a large sum of tax at the end of the financial year. At the same time, it ensures a regular inflow of tax revenues for the government, which is essential for the provision of public services and the efficient functioning of the government.
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