Individuals having net income tax liability exceeding Rs 10,000 in a financial year (FY) are mandatorily required to pay advance tax. Net tax liability refers to the estimated tax liability minus TDS (tax deducted at source) in an FY. According to the Income Tax Act, 1961, such an individuals have to make four specified quarterly payments to avoid penal interest
However, not all individuals with net income liability above Rs 10,000 in an FY are required to pay advance tax. The income tax laws allow certain exemptions.
Also read: Advance tax penalty: What is the penalty for missing advance tax payment due date
“Section 211 of the Income Tax Act requires individuals to pay advance tax in four quarterly payments between June 15 and March 15 of FY. However, individuals, opting for presumptive taxation scheme, must pay advance tax in one payment by 15th March. Further, there is no requirement of payment of advance tax for senior citizens (individuals aged 60 or more) provided they do not have any income from business or profession,” says Itesh Dodhi, Director, Nangia Andersen India, a business consultancy company.
Also read: What are the income tax audit requirements for those who have opted for presumptive taxation scheme.
What are the dues dates of advance tax payments?
Here is a look at when an individual is required to pay advance tax and the percentage of advance tax payments.
| Due Date | Advance tax payment percentage |
| On or before June 15 | 15% of the net estimated tax liability |
| On or before September 15 | 45% of the net estimated tax liability minus advance tax already paid |
| On or before December 15 | 75% of net estimated tax minus advance tax already paid |
| On or before March 15 | 100% of net estimated tax minus advance tax already paid |
Hence, for the current FY 2023-24 (AY 2024-25), an individual is required to pay the first advance tax payment by June 15, the second advance tax payment by September 15, the third advance tax payment by December 15 and the final advance tax payment by March 15.
Here is an example to understand this. Mr. Venkata estimates his annual income as Rs 7,80,000 and opts for the new tax regime for FY 2023-24 (AY 2024-25). His estimated tax liability comes to be Rs 34,320. There is no TDS by the employer. As the net estimated tax liability exceeds Rs 10,000, he will need to pay advance tax.
As per income tax laws, Mr Venkata is required to pay advance tax as follows:
| Due date of advance tax | Amt of advance tax to be paid |
| On or before June 15, 2023 | Rs 34,320*15%= Rs 5,148. |
| On or before September 15, 2023 | Rs 34,320*45%=Rs 15,444. (Rs 15, 444-5,148) = Rs 10,296 |
| On or before December 15, 2023 | Rs 34,320*75%= Rs 25,740. (Rs 25,740-5,148-10,296) = Rs 10,296 |
| On or before March 15, 2023 | Rs 34,320*100%= Rs 34,320. (Rs 34,320- 5,148-10,296-10,296) = Rs 8,580 |
One important point here is that advance tax is to be paid if the estimated income tax liability is above Rs 10,000. The tax deducted at source must be considered to know if advance tax payments must be made. What this means is that if an individual’s net tax liability (estimated tax liability minus TDS) is less than Rs 10,000, payment of advance tax is not mandatory.
If the estimated tax liability after TDS is Rs 10,000 or more, then advance tax must be paid mandatorily.
Incomes exempted from advance tax payment
“Individuals having certain specific income sources are exempted from payment of advance tax,” says Chartered Accountant Manas Chugh, head-regulatory services, Osgan Consultants, a Delhi-based business and tax consultancy company.
Here are the incomes exempted from advance tax payment:
(a) capital gains; or
(b) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games; or
(c) income under the head “Profits and gains of business or profession” in cases
where the income accrues or arises under the said heads of income for the first time; or
(d) dividend income, except deemed dividend.
“The first proviso of sub-section (1) of section 234C aims to shield taxpayers from the imposition of penal interest in situations where the precise calculation of advance tax liability is not feasible. Therefore, in the above-mentioned incomes, advance tax is required to be paid only when the actual income is earned,” says Chugh.
How to make advance tax payments?
Advance tax payments have to be made on the income tax department’s e-filing portal. The payment of advance tax is to be made either online or using offline bank challan.
For the offline bank challan method, the challan itself needs to be first downloaded from the e-filing ITR portal. For online tax payments, there are multiple payment options such as debit card, net-banking, RTGS/NEFT, UPI and credit card. On the e-filing portal, navigate to e-pay tax and then select the relevant assessment year and then under the minor head select Advance Tax (100) to make the payment.
Source: ITR e-filing portal
