Advance Payment Of Tax

Overview of Advance Payment of Tax

Advance payment of tax involves paying estimated taxes to the government before the end of the financial year, allowing taxpayers to fulfill obligations periodically rather than waiting until year-end.

1. Estimated Tax Liability:

Taxpayers estimate their total income for the financial year and calculate their expected tax liability based on applicable tax rates, deductions, exemptions, and other factors.

2. Due Dates:

Tax authorities specify due dates for advance tax payments, typically in quarterly installments throughout the financial year. 

In India, for example, advance tax payments are due on specific dates such as June 15th, September 15th, December 15th, and March 15th.

3. Payment Process:

Taxpayers can make advance tax payments either online or offline through designated banks or authorized channels specified by tax authorities. 

Payment can be made via electronic funds transfer, net banking, debit card, credit card, or physical cash or cheque deposit.

4. Advance Tax Calculation:

Taxpayers calculate the amount of advance tax due for each installment based on the estimated income earned and tax liability incurred during the relevant period. 

The advance tax payable is typically a percentage of the total estimated tax liability for the year.

5. Income Sources:

Advance tax is applicable to various types of income, including salaries, business profits, professional fees, rental income, capital gains, interest, dividends, and other sources subject to income tax.

6. Penalties for Non-Compliance:

Failure to pay advance tax or underpayment of advance tax may attract penalties and interest charges imposed by tax authorities. 

It's essential for taxpayers to comply with advance tax payment requirements to avoid penalties and ensure timely fulfillment of tax obligations.

7. Adjustments and Refunds:

Taxpayers may adjust advance tax payments against their final tax liability at the time of filing their income tax returns. 

Any excess advance tax paid beyond the final tax liability may be eligible for a refund, subject to applicable rules and procedures.