Advance tax, often referred to as “pay-as-you-earn,” is the income tax payable in advance as per the provisions of the Income Tax Act. Sections 208 and 209 of the Income Tax Act outline the rules and computation methods for advance tax. This guide provides an overview of advance tax for corporates, the instalments involved, steps for online payment, and the consequences of non-payment or delayed payment.
Advance tax is mandatory for corporates with an estimated tax liability of INR 10,000 or more for the financial year. According to Rule 125 of the Income Tax Rules, corporate taxpayers must pay their taxes, including advance tax, electronically.
Advance tax is calculated on the estimated tax liability for the financial year. The following steps outline the computation process:
Estimate Total Income: Calculate the total income under all heads for the financial year.
Apply Deductions and Exemptions: Deduct all eligible tax credits, exemptions, rebates, and deductions from the total income.
Determine Taxable Income: Subtract deductions from the total income to compute taxable income.
Compute Tax Liability: Apply the applicable income tax rate to the taxable income and account for Tax Deduction at Source (TDS). The resulting figure is the advance tax payable.
Corporates are required to pay advance tax in four instalments as outlined below:
| Instalment | Due Date | Percentage of Estimated Tax Liability |
|---|---|---|
| First | 15th June | 15% |
| Second | 15th September | 45% (less the amount paid earlier) |
| Third | 15th December | 75% (less the amount paid earlier) |
| Fourth | 15th March | 100% (less the amount paid earlier) |
Key Points:
Any tax payment made by 31st March qualifies as advance tax.
If the due date falls on a bank holiday, the next working day is considered the last day for payment.
Follow these steps to pay advance tax online:
Visit the Income Tax Portal: Go to https://www.incometax.gov.in/iec/foportal/.
Access e-Pay Tax: Under Quick Links, select ‘e-Pay Tax’.
Enter PAN Details: Provide the company’s PAN and confirm it by re-entering. Enter the mobile number and click ‘Continue’.
Authenticate: Enter the OTP received on the registered mobile number.
Select Tax Type: Choose ‘Income Tax’ and click ‘Proceed’.
Enter Tax Details: Fill in details such as tax amount, surcharge, cess, interest, penalty, and others. Click ‘Continue’.
Choose Payment Mode: Select the payment mode and bank, then click ‘Continue’.
Verify and Pay: Review the challan details in the preview, verify, and click ‘Pay Now’.
Failure to pay advance tax or delayed payment attracts interest under Sections 234B and 234C of the Income Tax Act:
Interest under Section 234B:
Levied at 1% per month if at least 90% of the advance tax is not paid by 31st March.
Interest under Section 234C:
Levied at 1% per month for delays in instalments as detailed below:
| Instalment Due | Interest Period | Interest Calculated on |
| 15% by 15th June | 3 months | 15% of total tax – tax paid till 15th June |
| 45% by 15th September | 3 months | 45% of total tax – tax paid till 15th September |
| 75% by 15th December | 3 months | 75% of total tax – tax paid till 15th December |
| 100% by 15th March | 1 month | 100% of total tax – tax paid till 15th March |
By adhering to these provisions, corporates can avoid penalties and ensure compliance with tax laws.
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