Advance tax is a critical component of tax compliance in India, ensuring that individuals and businesses pay taxes on their income as it is earned, rather than waiting until the end of the financial year. As the third installment of the advance tax for the financial year 2024-25 is due on December 15, 2024, here’s everything you need to know about who should pay, how much to pay, and what happens if you miss the deadline.
What is Advance Tax?
Advance tax, often referred to as the “pay-as-you-earn” tax, requires taxpayers with a tax liability of ₹10,000 or more in a financial year to pay taxes in installments throughout the year. This system ensures the government receives tax revenue regularly and helps taxpayers avoid a large lump-sum payment at the end of the year.
Who Needs to Pay Advance Tax?
- Individuals and Businesses: Both salaried individuals and self-employed persons, as well as businesses, must pay advance tax if their total tax liability exceeds ₹10,000 in a financial year.
- Salaried Individuals: Employers deduct tax at source (TDS) from salaries. However, individuals must pay advance tax on additional incomes such as:
- Interest income from fixed deposits or savings accounts.
- Capital gains from the sale of shares, mutual funds, or property.
- Rental income or income from other sources.
- Self-Employed Professionals: Freelancers, consultants, and self-employed professionals are also required to pay advance tax on their estimated annual income.
- Presumptive Taxation Scheme: Taxpayers who have opted for the presumptive taxation scheme can make a single advance tax payment by March 15, instead of quarterly installments.
Advance Tax Payment Schedule
The advance tax must be paid in four installments over the financial year. Below is the payment schedule for FY 2024-25:
| Deadline | Percentage of Tax Liability Due |
|---|---|
| June 15, 2024 | 15% of the estimated tax liability |
| September 15, 2024 | 45% of the tax liability (cumulative) |
| December 15, 2024 | 75% of the tax liability (cumulative) |
| March 15, 2025 | 100% of the tax liability (cumulative) |
Third Installment Deadline
By December 15, 2024, taxpayers are required to pay 75% of their total advance tax liability, accounting for any payments made in the earlier installments.
What If the Deadline Falls on a Public Holiday?
This year, December 15, 2024, falls on a Sunday, causing confusion among taxpayers about whether payments can be made on the next working day. According to Income Tax rules:
- If the due date coincides with a public holiday, the next business day becomes the effective deadline.
- For this installment, payments made on December 16, 2024, will be accepted without penalties.
How to Calculate Advance Tax?
To compute advance tax liability:
- Estimate Your Total Income: Include all sources of income—salary, business profits, interest income, rental income, and capital gains.
- Calculate Total Tax Liability: Use the applicable income tax slabs and rates.
- Deduct Tax Credits: Subtract TDS and any eligible tax rebates or deductions under sections like 80C, 80D, etc.
- Pay Installments: Based on the schedule, pay the required percentage of your total tax liability.
What Happens If You Miss the Deadline?
If you fail to pay advance tax on time, you may face:
- Interest Penalty Under Sections 234B and 234C:
- Section 234B: Applies if less than 90% of the total tax liability is paid by the financial year’s end.
- Section 234C: Imposed for delays in installment payments.
- Increased Tax Liability: Interest is charged at 1% per month for the unpaid amount or delayed payment.
- Compliance Issues: Repeated delays may attract scrutiny from the tax department.
How to Pay Advance Tax?
Follow these steps to pay advance tax online:
- Visit the official Income Tax e-filing portal or the TIN-NSDL website.
- Choose the option for Challan No. ITNS 280.
- Select the type of payment as “Advance Tax (100)”.
- Enter your details (PAN, assessment year, tax amount).
- Make the payment through net banking, debit card, or other accepted methods.
Key Takeaways
- Advance tax ensures smooth and timely tax payments, reducing end-of-year burdens.
- The third installment deadline for FY 2024-25 is December 15, 2024, but payments can be made on December 16, 2024, without penalties since the due date falls on a Sunday.
- Self-employed individuals under the presumptive taxation scheme can make a single payment by March 15, 2025.
- Timely payments help avoid interest penalties and ensure compliance with tax regulations.
For further guidance, consult a qualified tax advisor or refer to the official Income Tax Department website. Stay compliant and avoid penalties by meeting your tax obligations on time.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered investment advice. Investors are encouraged to consult a financial advisor before making any investment decisions.
