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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

  • When should I pay advance tax
    If your tax liability for a year after reducing TDS exceeds Rs 10,000, you will be liable for payment of advance tax
  • Is an NRI liable for payment of advance tax?
    An NRI, who has an income accruing in India in excess of Rs 10,000, is liable for payment of advance tax.
  • I am a senior citizen having pension and interest income. Should I pay advance tax?
    Resident senior citizens not having income from business or profession are not liable for advance tax.
  • Will I be penalized if I do not pay advance tax?
    Non payment of advance tax will result in levy of interest under 234B and 234C of the Income tax Act, 1961.
  • Can I claim deduction under 80C while estimating income for determining my advance tax?
    Yes. You can consider all these deductions while estimating your income for the year for computing your advance tax liability.
  • What happens if I miss the deadline for payment of the fourth installment of my advance tax i.e. on 15 March
    You can still go ahead with payment of advance tax on or before the 31 March of the year. Such payment will still be treated as advance tax only.
  • How do I make an advance tax payment
    Advance tax payment is made using Challan 280 just like any other regular tax payment. You may read our detailed article on online payment of income tax.

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All Articles

  1. Know all about interest imposed under section 234A for late e-Filing of your Income Tax return. Find out how much interest to be paid in your case.
  2. Know all about interest imposed under section 234B for not paying advance tax. Find out how much interest to be paid in your case.
  3. Know all about interest imposed under section 234C for deferred payment of Advance Tax. Find out how much interest to be paid in your case.
  4. Learn about Advance tax and who should pay it. Find out how to calculate advance tax and due dates for payment of advance tax.
  5. Learn about Advance tax and who should pay it. Find out how to calculate advance tax and due dates for payment of advance tax.