Steps to calculate advance tax liability for paying the 1st installment by June 15

If there is a change in the tax liability, then the taxpayer can revise the quantum of advance tax in the remaining installments.

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A taxpayer opting for the presumptive taxation scheme of section 44AD is also liable to pay advance tax.

The total tax liability for any taxpayer is arrived at after taking into account the income earned from various sources. As per section 208 of the Income Tax Act, every person whose estimated tax liability for the year is Rs. 10,000 or more, has to pay his tax in advance, in the form of advance tax. The advance tax has to be paid in 4 installments during the financial year.

After making payment of first or second or third instalment of advance tax, if there is a change in the tax liability, then the taxpayer can revise the quantum of advance tax in the remaining installments and pay the tax as per revised estimates.

However, not all taxpayers need to pay advance tax even if their tax liability is supposed to be Rs 10000 or more in the year. A resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.

A taxpayer opting for the presumptive taxation scheme of section 44AD is also liable to pay advance tax in respect of business covered under section 44AD.

Due dates for payment of different installment of advance tax are:

All assessees (other than the eligible assessee as referred to in Section 44AD or section 44ADA)

By 15th June: Minimum 15% of advance tax

By 15th September: Minimum 45% of advance tax

By 15th December: Minimum 75% of advance tax

By 15th March: Minimum 100% of advance tax

Taxpayers who opted for presumptive taxation scheme of section 44AD or section 44ADA

By 15th June: Nil

By 15th September: Nil

By 15th December: Nil

By 15th March: Minimum 100% of advance tax

Any tax paid till 31st March will be treated as advance tax. If the last day for payment of any installment 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.

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

Computation of advance tax liability

Tax can be computed on the current income (estimated by the taxpayer) at the rates in force during the financial year.
From the tax so computed, tax deducted or collected at source will be deducted and the balance tax payable will be used to compute the advance tax liability.

Also, relief of tax allowed under section 90 or section 90A or any deduction under section 91 or any tax credit allowed to be set off as per section 115JAA or section 115JD will also be deducted while computing the advance tax liability

What if a taxpayer fails to pay advance tax? “You are required to pay interest on due tax under Section 234 C if there is a delay in the payment of Advance Tax,” says Deepak Jain, chief executive, TaxManager.in

How To Calculate Advance Tax Liability?

According to Jain, the procedure of calculating Advance Tax liability can be segregated into four simple steps.

Step 1: Sum up the total income earned from all the other sources besides the salary earned.

Step 2: To this amount add other income that you earned like interest from FDs, house rent, and lottery winnings.

Step 3: Deduct the expenses from that amount such as medical insurance, premiums, phone costs, travel expenses and further on.

Step 4: Now its times to calculate income tax liability on the total taxable income

Step 5: If the amount due tax liability is more than 10,000 after taking into account TDS and TCS, you are liable to pay Advance Tax.

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