Do you need to pay advance tax on capital gains from shares, dividends?

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Updated: September 24, 2021 4:41 PM

Advance Tax Payment Rules: While we file Income Tax Return (ITR) for the previous financial year to settle tax liability or claim a refund, advance tax comes into the picture in the year in which you make an income.

advance tax on capital gains, dividendsRepresentative image

While we file Income Tax Return (ITR) for the previous financial year to settle tax liability or claim a refund, advance tax comes into the picture in the year in which you make an income. As per the Income Tax rules, advance tax is required to be paid by any taxpayer, including salaried employees, whose tax liability is Rs 10,000 or more after paying TDS, TCS or MAT Credit.

However, senior citizens, who are residents of India and do not have income from business or profession, do not have to make the advance tax payment.

Now that a lot of persons are investing in stock markets and making capital gains and also earning from dividends, it is a common query if they need to pay advance tax. It is important to understand here that advance tax is paid when you can make an earning. However, in the case of capital gains or dividends, it is difficult to make an estimate of earnings in advance. Hence, experts say that advance tax on such earnings should be made on the applicable due date only after receiving the income receipt. If no instalment is due, then a taxpayer can pay the tax by 31st march of the applicable financial year.

ALSO READ | Can you claim Income Tax benefit on HRA if living with parents during work from home?

Advance Tax Payment Due Dates

Taxpayers have to pay advance tax in four instalments in a year. The four due dates (if not extended for some reason) for paying advance tax in a year are:

  1. On or before 15th June: Up to 15% of tax liability
  2. On or before 15 September: Up to 45% of tax liability
  3. On or before 15 December: Up to 75% of tax liability
  4. On or before 15 March: Up to 100% of tax liability

For example – The next due date is 15th December. So if a person is liable to pay advance tax, he/she should pay up to 75% of his/her tax liability by this date.

Advance tax payment can be made on www.tin-nsdl.com

Penalty

If a person fails to pay advance tax on time then he/she has to pay an amount of interest under Sections 234B and 234C. However, if a person has cleared 100% of his/her dues by 15th March, then he/she would not have to pay any tax at the time of filing ITR. As the Income Tax Department would adjust the advance tax paid by you against the total tax liability. In case of difference between tax liability and tax paid, the taxpayer would have to pay the balance amount along with interest.

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