People often think of income tax as a lump sum paid to the government at the end of the year. But instead of one annual collection, the government prefers smaller packets of revenue that come in throughout the year. The income tax that is paid in instalments is known as advance tax. 

Here are 10 essential things to know about advance tax:

  • Who is eligible: People whose tax liability is more than ₹10,000 per annum are eligible to pay advance tax. 

  • Who is not eligible: Senior citizens above the age of 60 who don’t own a business do not qualify for advance tax. 

  • When to pay: Advance tax is to be paid in 4 instalments. Check the table below for all the advance tax due dates:

Advance Tax Due Dates Payable %
On or before 15th June 15%
On or before 15th September  45%
On or before 15th December  75%
On or before 15th March (Of next year) 100%

0. What if 100% of advance tax isn’t paid by the end of the financial year? If the total advance tax paid is less than 90% of your advance tax liabilities, then a penalty is imposed. An interest of 1% is charged. So instead of paying 100% of your advance tax, now you are liable to pay 101%.

1. What is one misses a particular due date? A penalty of 1% per month is charged if the requisite percentage is not paid by the due date. 

2. What is presumptive advance tax? Presumptive advance tax is paid in full by 15th March of the current financial year based on predicted income. This frees the taxpayer from the tedious job of maintaining account books.

3. The case of salaried employees: Salaried Employees’ advance tax liability is taken care of by the TDS (Tax Deducted at Source), and they need to pay no further advance tax.

4. How to calculate advance tax liabilities? To simplify calculating tax liabilities, the Income Tax Department offers a free advance tax calculator. It requires an input of advance tax  challan number and other details and then gives a breakdown of advance tax liabilities by the due dates

5. What if the advance tax paid exceeds one’s tax liabilities? The income tax department refunds the advance tax amount that is mistakenly overpaid to your bank account. 

6. What is advance tax used for? The Central Government uses the advance tax amount to make its payments on time, diverts some of it to PM Natural Disaster Fund, and pursues annual socio-economic goals.