Advance Payment of Tax and Laws on it

There is a huge amount of ignorance with regards to tax payment in India, not only do people consider it unnecessary , they do not understand the advantages of paying taxes. Advance taxes are a step further which means that you would pay taxes before the financial year even begins. Read along to know the massive advantages of this and the procedure to do so!


Advance payment of tax makes it easy for both individual and the government in many ways. Taxpayers can get lesser burden by paying their taxes in parts throughout the Financial Year. The government can have the flow of Income during the year. This Article will put emphasis on Advance payment of taxes and the laws regarding it.

What is Advance Tax?

Advance Tax as the name suggests is the payment of tax in parts throughout the year if the taxes are exceeding Rs. 10,000/- in a financial year. The taxes should be paid in the year in which the income is received.

For example- if the income is earned in the Financial Year 2018-19, and the tax amount is exceeding Rs. 10,000/- then the taxes should be paid in that financial year i.e. 2018-19.

Advance tax receipts help the government with the constant flow of cash to meet its daily requirement rather than getting all the taxes at the end of Financial Year. All assesses can pay their taxes in advance like businessman, salaried, and self-employed etc.[1]

But for individuals who are the salaried employee, and the sole source of income is their salary, their tax advance would be taken care of by Tax Deducted at Source (TDS). This is done by the employer at the time of the payment of the salary which is then reflected in Form 16 i.e. TDS Certificate.

Liability to pay Advance Tax

According to Section 208[2] of Income Tax Act, 1961 if the tax liability of a person is Rs. 10,000 or more, he can pay tax in advance in the form ‘advance tax’. However, any resident senior citizen who does not have any source of income from a business or profession is not liable to pay advanced tax.

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The due date for payment of Advance Tax[3]

The due date for taxpayers for both individuals and corporate entities are:

  • On or before 15th June – up to 15% of the Advance Tax
  • On or before 15th September- Up to 45% of the Advance Tax
  • On or before 15th December- Up to 75% of the Advance Tax
  • On or before15th March- Up to 100% of the Advance Tax

Apart from these, the taxpayers who have opted for the Presumptive Scheme of Taxation provided under Section 44AD and Section 44ADA of Income Tax Act, 1961. They are not required to follow the above due dates. The due date for payment of advanced tax is applicable to those taxpayers is 15th March and they are required to pay 100% tax liability before the said period.

Mode of Payment of Tax

According to Rule 125 of Income-tax Rules, 1962 it states that a corporate taxpayer has to pay taxes by the method of an electronic method using Internet Banking Facility. The taxpayers other than companies can pay taxes by using Internet banking facility of an authorized bank and any taxpayer can pay taxes by using electronic mode and physical mode by depositing the challan at the bank. Moreover, this is to note that tax relief is allowed under Section 90 and Section 90A or deductions mentioned under Section 91 of the Act or credits can be set off under Sections 115JAA and 115JD. These all shall be deducted while computing the advance tax liability.

Interest on late payment of Advance Tax[4]

Under Section 234B and 234C of the Act interest on late payments of advanced taxes mentioned.

  • In section 234C- Interest payable 1% every month if the tax is not paid according to the schedule.
  • In Section 234B- Interest payable 1% every month if at the end of the FInancial Year, 90% of the tax has not been paid.
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Therefore, I conclude that the Advanced payment of tax is very useful for both government and taxpayers. The government can get a flow of cash throughout the year which helps them to meet the expenses and taxpayers can pay taxes throughout the year and not get burdened by paying the whole sum at the end of the Financial Year

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