Income Tax Advance Tax – Deadline, Exemptions, Penalty for Delay

The income tax department is launching an online campaign to educate individuals who had substantial financial transactions in 2023–2024 and to remind them to accurately calculate their advance tax liability and submit the required amount by March 15.

Income Tax Advance Tax 

The income tax that is paid by the taxpayer ahead of time as opposed to one big payment at the end of the fiscal year is known as advance tax. In essence, it’s the tax that you pay on your income. The taxpayer must make instalments by the deadline specified by the income tax department.

Whether or not you must pay advance tax depends on your annual income and tax liability. After deducting tax deducted at source (TDS), you must pay advance tax if your expected yearly tax due for any given financial year exceeds 10,000. 

The Income-tax Act of 1961 states that to avoid paying penalties, persons must pay advance tax on time. The goal is to persuade the taxpayers and companies whose unpaid taxes for 2023–24 are not in line with their financial transactions thus far this year. The tax authorities have identified these individuals and entities. 

Advance Tax Dates 2024

The due dates for advance tax payments for the financial year 2023-24 in India are as follows:

  • On or before 15th June 2023: 15% of advance tax
  • On or before 15th September 2023: 45% of advance tax (minus any advance tax already paid)
  • On or before 15th December 2023: 75% of advance tax (minus any advance tax already paid)
  • On or before 15th March 2024: 100% of advance tax (minus any advance tax already paid)

For taxpayers who have opted for the Presumptive Taxation Scheme under sections 44AD & 44ADA, the entire amount of their advance tax should be paid in one instalment on or before 15th March. 

Income Tax Advance Tax

What is the penalty for not paying Income Tax advance tax?

It’s important to meet the advance tax payment deadlines to avoid these penalties. If you fail to pay advance tax in India, the Income Tax Act imposes interest penalties under sections 234B and 234C:

  • Section 234B: If you don’t pay advance tax or there’s a shortfall, you’ll be charged an interest of 1% per month or part of a month on the unpaid amount.
  • Section 234C: For delay in payment of any instalment of advance tax, the penalty is also 1% per month or part of a month on the due amount.

Remember, the last instalment for the current fiscal year is due on 15th March 2024.

Who is exempted from paying Income Tax advance tax?

In India, certain individuals are exempt from paying advance tax. Individuals who are 60 years or older and do not have income from a business or profession are exempt from advance tax. 

Those whose taxes are deducted at the source (TDS) and who do not have any other sources of income. It’s always a good idea to consult with a tax professional or refer to the official guidelines for any updates or specific scenarios that may apply to your situation. 

However, advance tax would be due on any income received from non-salary sources such rent, capital gains, interest, and other sources. One is exempt from paying the advance tax if the total amount of tax deducted (TDS) exceeds the total tax owed for the year.

What are the benefits of paying Income Tax Advance Tax?

These benefits align with the principle of ‘pay as you earn,’ making it easier for taxpayers to handle their tax liabilities. Paying advance tax has several benefits:

  • It encourages taxpayers to plan their finances and ensures a steady flow of revenue to the government. 
  • Spreading tax payments over the year eases the burden of a lump sum payment at the end of the fiscal year. 
  • Timely payment of advance tax helps avoid interest and penalties that accrue for late payment of taxes. 
  • It allows for better cash flow management, as taxpayers don’t have to pay a large sum at once. 
  • The government benefits from a regular inflow of funds, which can earn interest, and taxpayers are less likely to default on their tax payments. 

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