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Advance Tax is the ultimate tax stress buster

Filing your income tax return can be super stressful. You have to plough your way through bank statements, salary slips, and other documents to gather all the information, organize it, and then fill out those forms. Plus, the income tax amount can seem overwhelming.  

Author:IndiaFirst Life | Date:03 Nov 2023 | Time:15:40:00

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Filing your income tax return can be super stressful. You have to plough your way through bank statements, salary slips, and other documents to gather all the information, organize it, and then fill out those forms. Plus, the income tax amount can seem overwhelming.  

The simplest solution is to make advance tax payments. Read on to find out how advance income tax payment can make life easier. 

What is Advance Tax? 

Remember the saying, “take it one step at a time?” Advance tax is like that. So, rather than paying your income tax as a lump sum at year-end, income tax advance tax lets you pay your taxes in instalments across the financial year, on specified due dates. Think of it as a tax that you pay as you earn. This tax must be paid in the same fiscal as the financial year during which the income is received.  

Who Should Pay Advance Tax? 

If you estimate your tax liability to be above Rs. 10,000 after accounting for TDS (Tax Deducted at Source) in a financial year, you are eligible to pay advance tax.  

Income from salary, business, freelance assignments, consultancy, professional services, rent, shares, fixed deposits, and capital gains attracts advance tax. Corporate entities, Partnership Firms and LLPs, and Non-Resident Indians are also eligible. Income tax advance tax payment is not applicable to senior citizens aged above 60 but only if they do not have a business income.  

Also read: From TDS to Self-Assessment Tax – Your Complete Guide! 

Calculating Advance Tax Liability 

When calculating your advance tax, estimate only your yearly income. Consider what you earn, the tax already taken from it, and the investments you've made. The advance income tax payment is based on this estimated total income. 

These four steps will simplify it for you: 

1. Make an estimate of the total income you’ve earned from all sources, from 1st April- 31st March of the financial year. 
2. Subtract all eligible expenses and deductions from that income, such as medical insurance premiums, phone costs, travel expenses, etc. 
3. Now, compute tax on such Income as per the tax regime opted by you. 

4. Deduct the TDS/TCS from that amount. 

If the amount of tax calculated is more than 10,000, then you are liable to pay advance tax. 

Here is an example: 

Sneha, a digital marketing consultant, expects an annual income of Rs 20,00,000 for FY 2023-24. Her estimated expenses are Rs 12,00,000. She has invested Rs 40,000 in a PPF account, paid Rs 25,000 for life insurance, and Rs 12,000 for medical insurance. She expects a TDS of Rs 30,000 on some professional receipts. Apart from that, she expects Rs 10,000 in interest from her fixed deposit.  

Here is Sneha’s advance tax calculation.

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 

There’s another simpler way to do this. You can use IndiaFirst Life’s online Income Tax Calculator to estimate your tax liability.  

Advance Tax Due Dates 

The specified dates for advance tax filing are on or before 15th June, 15th September, 15th December and 15th March of the financial year in which the income is earned. You will be charged an interest of 1% monthly interest if you miss these dates. 

Making Advance Tax Payments 

There are two ways to make your advance income tax payment – physically at banks designated by the income tax department, or through the income tax department's tax payment website.  

Paying advance tax online is the most convenient way if you follow these steps: 

  1. 1) Click on the link https://www.incometax.gov.in/iec/foportal/ 

  2. 2) Make the payment and keep the advance tax filing challan you receive for your reference and ITR Filing 

Documenting Advance Tax Payments 

Once the Advance Tax is paid, it will be reflected on your Form 26AS. It is important to keep a record of all your challans and present them at the time of final income tax payment.  

Paying your advance tax is crucial especially if you earn income from multiple sources. It eases the financial burden, helps maintain financial discipline, and ensures compliance with tax regulations. By estimating and paying tax periodically, you are in a better position to manage your tax liabilities and avoid last-minute stress and penalties. 

BY

IndiaFirst Life

Headquartered in Mumbai, IndiaFirst Life Insurance Company Limited (IndiaFirst Life), with a paid-up share capital of INR 663 crore, is one of the country's youngest life insurance companies. Our key differentiators are our simple, easy-to-understand products that are fairly-priced and efficiently serviced.We offer a diversified suite of over 46 need-based products & Riders (as of 31st March 2022) catering to varied customer segments, leveraging multiple distribution capabilities and augmenting various investment options. In all, propositions under the categories of Protection, Assured Savings, Wealth, Pension, Health and Group Funds for Employee Liabilities form a complete suite of offerings that help our customers prepare for the certainties of life. Our products are easy to understand and competitively priced with risk management being our core strength.

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