Understanding Advance Tax & Who Needs to Pay It and more
What is Advance Tax?
Advance tax is the process of paying your income tax in installments during the financial year, instead of paying it all at the end. It is also called the “pay-as-you-earn” tax system. Under the Income Tax Act, if your total tax liability for the year is ₹10,000 or more (after TDS), you must pay advance tax. This rule applies to individuals, businesses, freelancers, and professionals.
Who Needs to Pay Advance Tax?
You need to pay advance tax if:
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You earn income from salary, business, or freelancing.
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You earn from capital gains, fixed deposits, or other investments.
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Your tax liability exceeds ₹10,000 after adjusting for TDS.
Special Rule for Older People: Individuals aged 60 years or above, who do not have income from business or profession, are exempt from paying advance tax.
Advance Tax Due Dates
The Income Tax Department has set specific due dates for advance tax payments in a financial year:
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15 June: 15% of total tax liability
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15 September: 45% of total tax liability
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15 December: 75% of total tax liability
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15 March: 100% of total tax liability
Why is Advance Tax Important?
Paying advance tax ensures:
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Compliance with income tax laws.
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Avoidance of interest penalties under Sections 234B and 234C.
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Smooth financial planning by spreading out payments.
Penalties for Non-Payment
If you fail to pay advance tax on time or pay less than the required amount, you may be charged interest. This can increase your overall tax liability.
Income tax return – File here
Conclusion
Advance tax is a legal requirement for most taxpayers with higher annual tax liability. Understanding Advance Tax & Who Needs to Pay It, By knowing the due dates, calculating your income accurately, and paying on time, you can avoid penalties and stay compliant. Whether you are a salaried professional, business owner, or investor, understanding and paying advance tax is a key part of your financial responsibility.