What is Advance Tax?

What is Advance Tax?

Advance tax means income tax should be paid in advance instead of lump sum payment at year end. It is also known as pay as you earn tax. These payments have to be made in instalments as per due dates provided by the income tax department.

Who should pay Advance Tax?

Salaried, freelancers and businesses– If your total tax liability is Rs 10,000 or more in a financial year you have to pay advance tax. Advance tax applies to all taxpayers, salaried, freelancers, and businesses. Senior citizens, who are 60 years or older, and do not run a business, are exempt from paying advance tax.

Presumptive income for Businesses–The taxpayers who have opted for presumptive taxation scheme under section 44AD have to pay the whole amount of their advance tax in one instalment on or before 15 March. They also have an option to pay all of their tax dues by 31 March.

Presumptive income for Professionals– Independent professionals such as doctors, lawyers, architects etc. come under the presumptive scheme under section 44ADA. They have to pay the whole of their advance tax liability in one instalment on or before 15 March. They can also pay the entire amount by 31 March.

Read in detail about presumptive taxation here Want a CA to calculate and help pay your advance tax dues?

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Due Dates for payment of Advance Tax

FY 2019-20 & FY 2018-19 for both individual and corporate taxpayers

Due Date	Advance Tax Payable
On or before 15th June	15% of advance tax
On or before 15th September	45% of advance tax less advance tax already paid
On or before 15th December	75% of advance tax less advance tax already paid
On or before 15th March	100% of advance tax less advance tax already paid

For taxpayers who have opted for Presumptive Taxation Scheme under section 44AD & 44ADA – Business Income

Due Date	Advance Tax Payable
On or before 15th March	100% of advance tax

Our CAs will calculate your advance tax liability so you can pay your dues on time.

Calculation of advance tax liability

We will explain the calculation by way of an example. Ajay is a freelancer earning income from the profession of interior decoration. For the FY 2019-20, Ajay estimates his annual gross receipts at Rs 20,00,000. Ajay estimates his expenses at Rs 12,00,000. Ajay has deposited Rs 40,000 in PPF account. Ajay has also paid Rs 25,000 towards LIC premium. Further, Ajay has paid Rs 12,000 towards medical insurance premium. The professional receipts of Ajay are subject to TDS. Ajay estimates a TDS of Rs 30,000 on certain professional receipts for the FY 2019-20. Besides professional receipts, Ajay estimates an interest of Rs 10,000 on fixed deposits held by him. Ajay’s advance tax liability would be as below:

INCOME ESTIMATION FOR ADVANCE TAX	AMOUNT (Rs)	AMOUNT (Rs)
Income from profession:
Gross receipts	20,00,000
Less: Expenses	12,00,000	8,00,000
Income from other sources:
Interest from fixed deposit		10,000
GROSS TOTAL INCOME		8,10,000
Less: Deduction under section 80C
Contribution to PPF	40,000
LIC premium	25,000
	65,000
Deduction under section 80D	12,000	77,000
TOTAL INCOME		7,33,000
TAX PAYABLE		59,100
Add: Education cess @ 4%		2,364
		61,464
Less: TDS		30,000
TAX PAYABLE IN ADVANCE		31,464

ADVANCE TAX PAYMENTS
Due date	Advance tax payable	Amount (Rs)
15th June	15% of Advance tax	4,700
15th September	45% of Advance tax	14,100
15th December	75% of Advance tax	23,600
15th March	100% of Advance tax	31,400

Frequently Asked Questions