Advance tax: If your estimated tax liability for any given financial year after subtracting tax deducted at source (TDS) exceeds Rs 10,000 then advance tax needs to be paid following a specified schedule. However eligible senior citizens and other prescribed individuals need not pay advance tax. Read here to know more about advance tax.
Schedule of advance tax for salaried individuals
Advance tax needs to be paid in four specified instalments in June, September, December and March of the relevant financial year. The last date for paying the fourth instalment of advance tax for incomes relating to FY 2023-24 is March 15, 2024.
The due dates and percentage of advance tax payable is shown in the table below:
Who is not required to pay advance tax
Some taxpayers need not pay any advance tax. According to Ankit Jain, partner, Ved Jain & Associates, the following categories of taxpayers are exempt from paying advance tax:
- Senior citizens: Senior citizens who do not have any income from business or profession are exempt from paying advance tax.
- Presumptive taxation scheme: Taxpayers who have opted for the presumptive taxation scheme under section 44AD or 44ADA must pay their entire income tax amount in one instalment on or before March 15 of the financial year.
Tax experts say that since TDS is deducted for salaried individuals, they need not pay any advance tax unless certain circumstances have changed. According to Jain, “While salaried individuals are not exempted from payment of advance tax, they usually don’t have to pay advance tax as the whole of the tax on their income is deducted by their employer as TDS. However, if one has received significant rental income, capital gains, interest or dividend, he may become liable to pay advance tax on such income.”
There might also be a case where an individual’s employer is not deducting the appropriate amount of TDS. According to Jain, “A salaried individual should verify whether the tax deducted from his salary by his employer is appropriate or not. If the employer is not deducting the appropriate TDS on the income of the said individual, it is the responsibility of the individual to deposit the shortfall as advanced tax on his own volition.”
Do you have to pay a penalty for not paying advance tax?
There are two types of penalties (under section 234C and section 234B) which are levied if an individual has missed paying their advance tax amount and instalments within the specified deadline. Penal interest under section 234B of the income-tax Act is levied if there is any default in payment of advance tax, whereas penal interest under section 234C is levied for deferment in payment of advance tax.
Penal interest under section 234C
Interest under section 234C is levied at 1% rate per month for three months. “This exercise has to be done for each respective quarter where advance tax was not paid. If any amount of advance tax is still outstanding as on 1st April of next year, then interest at 1% rate is payable from 1st April till the month in which balance tax dues are paid,” says chartered accountant Rahul Kapoor, Managing Partner, RKCA & Co. LLP, a CA firm.
“In case taxpayers make the payment after March 15 but on or before March 31 then one month interest under section 234C will be levied,” says Mihir Tanna, associate director- direct tax, S.K Patodia LLP, a CA firm.
Penal interest under section 234B
According to provisions of section 234B penal interest will be levied if a taxpayer has failed to pay advance tax or paid less than 90% of the assessed tax of the individual.
“Interpreting the provisions, it is understood that, if 90% of advance tax is paid then no interest is payable under section 234B. As per the provisions, the taxpayer is required to pay penal interest at 1% rate per month or part on the balance advance tax from 1st April of A.Y. to the date on which self-assessment tax is paid,” says Tanna.
