Don’t Miss These Important Advance Tax Rules and Guidelines

Date : 24/09/2023
Read: 3 mins

Find out to whom is an advance tax applicable, and what are the important rules regarding the applicability, payment, timeline and delays.

With the applicability of the Finance Act 2023, any person with an estimated tax liability of Rs 10,000 or more must pay advance tax. This, along with various other advance tax-related rules are provided under section 208 of the Income Tax Act, 1961.

Advance tax has to be paid by anyone with an income tax liability of Rs 10,000 or more
This rule does not apply to senior citizens, provided they don’t have business or professional income
The payment mode rules are different for different types of assessees
Timely payment of advance tax is important to avoid penal interest charges under sections 234B and 234C

The Latest Advance Tax Rules

Applicability –

The advance tax payment rules of 2023 provide that every individual, including salary earners, is required to pay advance tax within the provided due dates
Resident senior citizen with no income from business or profession is not liable to deposit advance tax
Taxpayers who have opted for presumptive taxation under section 44AD or 44ADA must pay 100% advance tax by 15 March of the financial year

Also Read: NRI Rental Income And Advance Tax: What You Need To Know

Due Dates –

All other taxpayers must pay a minimum of 15% of advance tax by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March of the financial year
Any tax paid till 15 March is deemed to be advance tax
If the due date falls on a bank holiday, the following working day is considered to be the due date

Payment –

A corporate taxpayer must pay advance tax by using the internet banking facility of the authorised banks
Non-corporate taxpayers who must get their accounts audited, too, must pay through electronic mode via internet banking of authorised banks
Any other taxpayer can pay through challan at the receiving bank or through electronic mode

Estimated Tax Liability

To estimate your tax liability, you must assess your income flow expected during the year. You will then consider the tax deducted and collected at source, foreign tax credits, section 89 reliefs, etc. from the estimated tax liability.

Organisations generally calculate the estimated tax liability of their salaried employees. Accordingly, the tax is calculated, deducted from the salary and deposited to the income tax department by the employer, on behalf of the employee. If an employee changes employment during the financial year, he or she must inform the new employer about the income earned and tax deducted during the year.

Conclusion

You must remember that a penal interest is charged under sections 234B and 234C respectively for delays in advance tax payment. Interest of 1% per month or part thereof is applicable. Therefore, do not forget to calculate your tax liability for the year and pay your advance tax by the due date.