{"id":266275,"date":"2024-10-04T10:54:47","date_gmt":"2024-10-04T10:54:47","guid":{"rendered":"https:\/\/imarticus.org\/blog\/?p=266275"},"modified":"2024-10-08T07:10:17","modified_gmt":"2024-10-08T07:10:17","slug":"advance-tax","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/advance-tax\/","title":{"rendered":"Understanding Advance Tax: What Is It and Who Is Liable to Pay?"},"content":{"rendered":"
Tax payment is often considered a yearly ritual during filing Income Tax Returns (ITR). On the contrary, it is a continuous process. Advance tax is just one aspect of it.\u00a0<\/span><\/p>\n
Advance tax is payable by individuals on income sources beyond their salary. These sources include but are not limited to fixed deposits, rent, capital gains from shares, lottery wins, profits from business or profession, and income from other sources. It is a financial obligation that certain businesses or individuals have towards the Indian government.\u00a0<\/span><\/p>\n
A portion of the annual tax liability is paid in advance - like an EMI -\u00a0 instead of making a lump sum payment at the end of the financial year. Taxpayers must pay on the due dates mentioned by the Income Tax Department. Late payment of advance tax can attract interest under Section 234B and 234C of the Income Tax Act, 1961. Let\u2019s understand what advance tax is, who should pay it, and how to pay the tax amount.\u00a0<\/span><\/p>\n
What is advance tax<\/span>?\u00a0<\/span><\/h2>\n
Advance tax is not just a financial obligation, it's a proactive approach to paying taxes. Also known as the \u2018pay as you earn tax\u2019, it empowers you to manage your tax liabilities by paying in instalments throughout the year, in the same year the income is generated.\u00a0<\/span><\/p>\n
Taxpayers, with income exceeding Rs. 10,000 in a financial year (after subtracting TDS) have to pay <\/span>advance tax<\/span> amounts in instalments on specified dates by the Income Tax Department.\u00a0<\/span><\/p>\n
Advantages of paying advance tax<\/span><\/h2>\n
If you are wondering, \u2018How is paying this tax amount beneficial\u2019, let me break it down for you. Here are a few advantages of paying <\/span>advance tax<\/span>:\u00a0<\/span><\/p>\n
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Paying the tax amount will reduce taxpayer\u2019s stress. You will not have to worry about money shortages or tax payments at the last moment.\u00a0<\/span><\/li>\n
It is a great way to save taxpayers from defaulting on their tax payments.\u00a0<\/span><\/li>\n
Businesses can manage their finances better and have a clearer picture of what they have earned in revenue.\u00a0<\/span><\/li>\n<\/ul>\n
Who is liable to pay advance tax<\/span>?<\/span><\/h2>\n
The people who are liable to pay advance tax are:\u00a0<\/span><\/p>\n
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Taxpayers:<\/b> Individuals owing more than Rs. 10,000 in taxes, after deduction of TDS, in a financial year need to pay advance tax. This includes all categories of taxpayers including salaried professionals, freelancers, and senior citizens.\u00a0<\/span><\/li>\n
Senior citizens: <\/b>People over 60 years of age who don\u2019t own an enterprise are not liable to pay the <\/span>advance tax<\/span>. <\/span>\u00a0<\/b><\/li>\n
Presumptive income of businesses: <\/b>People who opt for the presumptive tax rule under Section 44AD, which is a simplified taxation scheme for small businesses, are liable to pay the entire advance tax on or before 15th March<\/span><\/li>\n
Independent professionals: <\/b>Professionals like architects, lawyers, doctors, etc., who choose the presumptive taxation scheme under advance tax Section 44ADA fall under this category. They must pay the total advance tax in a single instalment on or before 15th March. They also have the option to pay it on or before 31st March.\u00a0<\/span><\/li>\n<\/ul>\n