Advance Tax Payment 2023-24: Due Date, Online Procedure, Penalty
The advance tax payment is the system of paying income tax in advance, throughout the year (in instalments), instead of paying the full tax liability in a lump sum at the end of the financial year. The upcoming due date of the advance tax payment for the financial year 2023-24 is 15th September. This payment of advance tax comes with rules and regulations that you should be aware of.
So, here you’ll know in detail what is advance tax payment, its eligibility, how to calculate the tax, online procedure and payment, due dates, penalty and challan.
But first, let’s begin with the basics of advance tax payment.
What is Advance Tax Payment?
The process of paying income tax in advance, including extra revenues, instead of paying at the end of the financial year is known as an advance tax payment. Individuals, as well as businesses, can pay advance income tax if their estimated income tax liability is more than or equal to ₹ 10,000 after TDS (Tax Deducted at Source).
Taxpayers should estimate their income and then calculate their tax liability according to the provisions of the Income Tax Act, 1961, applicable to them. In such a case, he is not required to submit any estimate or statement of income to the tax authorities. Then they can pay the advance tax in four instalments during a particular financial year. The due dates for payment of advance tax are declared by the Income Tax Department.
If a taxpayer’s estimated income rises or falls over the course of the year or as the instalment progresses, the payable advance tax amount needs to be adjusted accordingly. Thus, the amount of the payable advance tax on due dates varies between taxpayer categories.
The advance tax is also called the “pay as you earn” or “earn tax” because the taxpayer makes the tax payments in instalments throughout the year, based on the income, as and when earned.
Who is Liable to Pay Advance Tax for FY 2023-24?
According to Section 208 of the Income Tax Act of 1961, if your tax liability exceeds INR 10,000 in a fiscal year, you must pay advance tax. This includes:
- Professionals, businesses and salaried employees: Individuals with a tax burden of more than INR 10,000 must pay the tax in advance. Here, ‘income’ includes rental income, fixed deposit interest, lottery prizes, capital gains from the stock market, etc. Senior citizens not earning an income from any business are not required to pay any advance tax.
- Professionals with presumptive income: Section 44ADA of the Income Tax Act of 1961 provides for the presumptive taxation of income and gains derived from professions listed in Section 44AA(1) which includes doctors, architects, lawyers, and other independent professionals. It is exclusively available to selected professions with annual gross receipts of less than INR 50 Lacs. So, if anyone has opted for presumptive taxation, they will have to pay their whole tax bill in one lump sum on or before March 15. They can also pay the whole due tax amount by March 31.
- Businesses with presumptive income: When a taxpayer chooses to pay a presumptive tax under Section 44AD, he/she must pay the entire tax amount in a single instalment by March 31. Section 44AD provides assistance to small taxpayers operating in any business other than the business of transporting, hiring, or leasing goods carriages as defined in Section 44AE.
The following particulars come under the ambit of advance tax payment
- Your tax liability should be at least INR 10,000
- You should either be employed or self-employed
The following components should be included in the ‘taxable income’
- Capital gains on stocks
- Fixed deposit interest
- Winnings from the lottery
- Rent or money generated by a home
The following are exempted from paying advance tax payments:
- Senior citizens not having income from business or profession are not liable for advance tax
- If TDS is deducted from the salary of an individual. (Note that in this case, income from other avenues like interest, capital gains, rental income etc. will be liable for advance tax payment)
- If the TDS paid by an individual is more than his/her tax liability.
Advance Tax Payment Due Dates for FY 2023-24
The advance tax is paid in 4 instalments over a financial year.
Here are the advance tax schedules for self-employed individuals and corporate taxpayers.
|Advance Tax Due Date
|Tax to be Paid
|15% of tax liability
|45% of tax liability
|75% of tax liability
|100% tax liability
Those businesses which choose presumptive taxation under Sections 44AD and 44ADA have to pay 100% advance tax on or before 15th March.
Note 1: Any tax paid till 31st March will be treated as advance tax
Note 2: If the last day for payment of any instalment of advance tax is a day on which the banks are closed, then the taxpayer should pay the advance tax on the immediately following working day.
How to Pay the Advance Tax Online?
As per Rule 125 of the Income-tax Rules, 1962, a corporate taxpayer (i.e., a company) shall pay taxes through the electronic payment mode using the internet banking facility of the authorised banks.
Taxpayers other than a company who are required to get their accounts audited shall pay taxes through the electronic payment mode using the Internet banking facility of the authorised banks.
Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. by depositing the challan at the receiving bank.
The steps for the online payment of advance tax are outlined below.
- Visit the official Government website of the Tax Payment Portal
- Click “Services” – e payment: Online Tax Payment
- Choose the Challan No. 280 to pay your income tax (Advance tax)
- Fill out the form with the correct information. You must provide information such as the correct assessment year, details of the PAN card, address, phone number, email address, bank name, captcha code, and other pertinent information.
- You will then be redirected to the bank’s Net Banking website.
- Make the payment using a debit or credit card
- Following that, the receipt of the tax payment will be displayed and you will receive your Challan Identification Number (CIN).
- Record and save your CIN number, for you will need this while filing your ITR.
Computation of Advance Tax for Individuals
Taxpayers can calculate their advance tax liability by following the steps given below:
STEP 1: First taxpayers should make a comprehensive estimate of their “income” in order to calculate the tax liability. It should include revenue from different sources like capital gains, interest, income, rent, professional income, and so on.
STEP 2: Then add salary income to the year’s estimated revenues from different sources to compute the gross taxable earnings. It must be noted that advance tax is not paid on salary. The salary component influences the applicable tax slab and increases tax liability.
STEP 3: Calculate your tax liability by referring to the most recent income tax slab that applies to you.
STEP 4: Subtract the TDS amount that will be deducted for different earnings.
STEP 5: If the tax liability after the TDS deduction exceeds INR 10000, follow the advance tax payment guidelines.
Advance Tax Challan
Challan is a form used for paying taxes to the government. Tax paid through a challan is first deposited with the authorised banks and subsequently with the Income Tax department. Payment through a challan can be either made online via net banking or offline by submitting the challan at the designated bank branches.
Advance Tax Challan 280
Challan 280 is used for the payment of advance tax, self-assessment tax, tax on regular assessment, surtax, tax on distributed profits of domestic companies and tax on distributed income to unit holders.
It should be noted that in many cases, there is no fixed deadline for payment of taxes through Challan 280, as a majority of taxes paid are demand-based. However, the following deadlines need to be followed for payment of advance tax:
|On or before 15th June
|Up to 15% of advance tax
|On or before 15th September
|Up to 45% of advance tax
|On or before 15th December
|Up to 75% of advance tax
|On or before 15th March
|Up to 100% of advance tax
How can I rectify the mistakes in the advance tax challan?
Here is a step-by-step process to make changes in the advance tax challan:
Step 1: Visit the ITR filing website and log in to your account. Under the ‘Services’ column, select the ‘challan correction’ option.
Step 2: A new webpage will open. Here select ‘create challan correction request’.
Step 3: The income tax portal will ask you to select the appropriate option that needs correction. A taxpayer can select:
a) Change in the assessment year,
b) change in tax applicable (Major head) and
c) Change in type of payment (Minor head).
Once selected, click on continue.
Step 4: The next step will ask the taxpayer to provide details of the income tax challan that needs correction. Here an individual will have to mention either the assessment year or challan identification number (CIN). Click continue after this.
Step 5: Depending on the option selected, a new webpage will open. If an individual has given a CIN number, then respective challan details will show. Otherwise, if the assessment year (AY) was selected, all the challans relating to that AY will be shown as a list. One needs to select the respective challan which needs to be corrected. Click on continue once the selection is done.
Step 6: Now, an individual needs to enter the correct details of the option selected earlier. Click on continue. In the picture shown below, the example of correcting the assessment year was taken.
Step 7: Once the correct details are entered, an individual will be required to verify the correction in the tax challan. The verification can be done using an Aadhaar OTP, digital signature certificate (DSC) or using an electronic verification code (EVC) through net banking, Demat and bank account. Click continue after selecting the verification option.
Step 8: Once the correction is successfully e-verified, the income tax e-filing website will show the success message along with the transaction ID. Keep this transaction ID handy to track the status of the correction request submitted.
Using the Challan Correction Feature
Before using the challan correction online feature, a taxpayer should know the following prerequisites:
- The taxpayer should be registered on the e-filing ITR portal.
- Challan, which needs correction, should not be used while filing ITR. This means that the taxpayer should not have used the incorrect challan details in the ITR filed.
- Challan correction requests should not be pending with any other authority like banks, etc.
How to Download the Challan for Advance Tax?
To Download the challan for Advance Tax, follow the mentioned steps:
- Login to your Income Tax Portal account
- Navigate to e-File > e-Pay Tax
- Under the Payment History tab, find the particular CIN
- Navigate to Actions > Download
When you click on download, your challan receipt will be downloaded in a PDF format.
Interest on Late Payment of Advance Tax
Delays and defaults in payment of advance tax attract different types of interest. Sections 234B and 234C deal with the interest levied for:
- Failure to file an income tax return
- Failure to pay
- Underpayment of advance tax.
If one fails to file returns by the due date, then the associated interest penalties are outlined in Section 234A. Here, we will discuss two sub-sections – Sections 234C and 234B—relating to interest on late payment of advance tax.
The Income Tax Department allows you to pay advance tax in four instalments over the course of the fiscal year. However, if you default, you will face consequences in the form of an interest penalty.
Under Section 234C of the Income Tax Act, if you default on your instalment date, you will be charged a 1% of a simple interest rate for 3 months over the due advance tax amount that has not been paid. The interest payable on delayed payment of advance tax (except in the case of presumptive income under Section 44AD) is given below:
|Rate of interest ( Simple Interest)
|Period of interest
|Amount on which interest is calculated
|If the Advance Tax paid on or before June 15, is less than 15% of the total assessed amount.
|1% per month
|(15% of the total amount) – (the amount of tax already deposited before June 15)
|If the Advance Tax paid on or before September 15 is less than 25% of the total assessed amount.
|1% per month
|(45% of the total amount) – (the amount of tax already deposited before September 15)
|If Advance Tax paid on or before December 15 and is less than 75% of the total assessed amount.
|1% per month
|(75% of the total amount) – (the amount of tax already deposited before December 15)
|If Advance Tax is paid on or before March 15 and is less than 100% of the total assessed amount.
|1% per month
|(100% of the total amount) – (the amount of tax already deposited before March 15)
Section 234B outlines the fines and penalties that the Income Tax Department can levy in the event of a default in the payment of advance tax. Interest is assessed under section 234B in the following two situations:
a) Where the taxpayer fails to pay advance tax despite being obligated to do so: i.e., the tax liability for the fiscal year is higher than INR 10,000 after deducting TDS, and they have not paid any advance tax.
b) Where the taxpayer’s advance tax payment is less than 90% of the assessed tax or the total tax liability, they are obliged to pay.
Under Section 234B, interest is levied at the rate of 1% per month or part of the month on the advance tax amount that has not been paid. The interest is applicable from the 1st day of the next assessment year till the time when the complete payment or a regular assessment is made.
Suppose the total tax obligation of Mr. T is INR 50,000. Mr. T paid an amount up to INR 40,000 as an advance tax by March 15 of the current financial year. The remaining amount of INR 10,000 was paid by him at the time of filing his income tax returns on May 30. In this case, he needs to see whether the amount paid by him as advance tax is at least 90% of the assessed tax or not.
Mr. T had a total liability of Rs 50,000, so 90% of 50000 is Rs 45,000. However, till 15th March, Mr. T had paid Rs 40,000. Hence, Mr. T is liable to pay interest of 1% as per section 243B of the Income Tax Act 1961.
Section 234B interest calculation:
Rs 50,000 ( assessed tax) – Rs 40,000 ( advance tax paid) = Rs 10,000
Rs 10,000 x 1% x 2 months ( April, May) = Rs 200
Mr. T is liable to Rs 200 interest under Section 243B.
In another instance, say Mr. N had an estimated tax obligation of Rs. 50,000 which he did not pay on the due dates. He paid the taxes on 15th July while filing his ITR. The tax liability here is more than Rs. 10,000, so he would attract an interest payment for his deferred advance tax payment.
The interest he has to pay is calculated as follows:
Rs. 50,000 (assessed tax) x 1% x 4 months (April, May, June, July) = Rs. 2,000
Mr N is liable to Rs. 2,000 interest under Section 243(B)
Who is Exempted to Pay the Advance Income Tax?
Senior citizens, including self-employed individuals aged 60 years and above, are exempt from advance tax payment. The salaried individuals are also exempt from paying advanced tax as employers are required to deduct TDS from their salary every month. However, even for salaried taxpayers, earnings from income sources such as Fixed Deposit interest, rent, capital gains and other non-salary income will attract advance tax.
Refund in Advance Tax Payment
The IT Act specifies four dates as well as the proportion of advance tax that must be paid on each of these occasions. If you paid extra advance tax, you would be entitled to a refund under Section 237 of the Income Tax Act. Under Section 244A, you will also get a plus 6% interest per annum on the excess amount if the excess is greater than 10% of the tax liability.
Benefits of Advance Tax
It is critical that the taxpayer estimates the income and calculates the estimated tax on it to know their liability for the advance tax that is to be paid at specific intervals. There are many benefits of advance tax paid by the eligible individual:
- Advance tax aids in lowering taxpayer worry. Taxpayers do not have to worry about running out of money or making last-minute tax payments when they pay their taxes in advance.
- People who pay their taxes in advance are less likely to default on their tax liability and save money on interest applicable to defaulters.
- It is considered advantageous for the government because it allows for a consistent and smooth flow of income throughout the year.
Advance tax payment is a quarterly instalment payment to the tax agency before the end of the fiscal year. By paying an advance tax payment, you guard yourself against a load of paying the entire tax payable all in one go at the end. It also ensures a continuous flow of revenue for the government as well.
In aggregate, in the 4 advance tax pay instalments, if you end up paying more than your tax liability, the same will be refunded. Also, if the excess amount is more than 10% of your tax liability, you will also receive interest at 6% per annum on the excess amount. Thus, it is beneficial by all means to pay your advance taxes on time.
How can I check the status of the advance tax payment?
You can go to the official website. Enter your Challan Identification Number (CIN) here. After filling in all the required information, you can check the status of your advance tax payment.
Can I claim an 80C deduction while estimating their income to calculate my advance tax?
Yes, you can claim a deduction under Section 80C while estimating your income to calculate your advance tax. There are several subsections of Section 80C that offer tax exemptions. If you are eligible for those deductions, you could correspondingly calculate your tax liability and pay your advance tax accordingly.
Why should tax payments be made in advance?
Tax payments made in advance benefit both the government and the taxpayers. From the government’s perspective, it ensures a steady flow of revenue throughout the year. For individuals or organisations, it lessens the year-end strain of paying taxes in a flat payment.
Do NRIs also pay the advance tax?
If NRIs’ tax liability is more than ₹10,000 in a financial year, they must pay advance tax. Interest under Section 234B and Section 234C is applicable if advance tax is not paid.
What if I missed the advance tax due date of 15th March?
If you fail to pay advance tax, it will attract interest under 234B: As per Section 234B, you must pay at least 90% of the total taxes as advance tax by 31st March. If you fail to make advance tax payments, it will result in an interest of 1% on the unpaid amount.
How to pay the advance income tax on the capital gains?
It is not possible to predict the accurate amount of capital gains in advance. Therefore, if you earn capital gains after the advance tax due date, you may choose to pay the advance tax in the remaining instalments.
What are the documents required for advance tax payment?
You need to fill Challan No. ITNS 280 for advance tax. Required documents include PAN details, assessment year, and the mode of payment. A Challan Identification Number (CIN) will be allotted following the payment.
Can I pay advance tax every month?
No, you do not have to pay advance tax every month. You need to pay it in instalments on the prescribed date.
What is the TDS limit for the advance tax payment?
The TDS limit for advance tax payment is ₹10,000 in a financial year. If the amount exceeds, you are liable for the payment of advance tax.
Can I pay advance income tax in cash?
Yes, you can pay advance tax of up to ₹10,000 in cash.
Is advance tax an asset or liability?
Advance tax is considered an asset and is adjusted against one’s tax liabilities at the time of finalisation of the Balance Sheet.