Advance tax follows the ‘pay-as-you-earn’ principle, requiring taxpayers to pay income tax in installments during the financial year instead of making a lump sum payment at the end. It is governed by Sections 208 and 209 of the Income Tax Act, 1961 and applies to individuals whose estimated tax liability exceeds INR 10,000 in a financial year.
Exemption: Senior citizens (aged 60 or above) who do not earn income from business or profession are not required to pay advance tax.
Advance tax liability varies based on individual income. Follow these steps to determine how much you need to pay:
Calculate expected earnings from all five income heads:
Identify and subtract eligible deductions under applicable sections (e.g., Section 80C, 80D, 80E).
Formula:
Net Taxable Income = Total Estimated Income – Eligible Deductions & Exemptions
Determine tax payable based on the chosen tax regime (Old vs. New).
Subtract TDS/TCS (if already deducted) from the calculated tax liability.
Advance tax must be paid on the net tax amount arrived at in Step 5.
The due dates for advance tax payments differ based on the type of taxpayer:
Advance tax can be paid through online and offline methods.
By following these guidelines, taxpayers can ensure timely compliance and avoid interest or penalties for late payments. Advance tax planning helps in better financial management and prevents last-minute tax burdens. Stay informed and pay your taxes efficiently!
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