Advance Tax Calculation Process- How to Calculate Advance Tax

Advance tax indicates that income tax has to be paid in advance rather than a lump sum payment done the year-end. It is also referred to as ‘pay as you earn tax’. Advance tax will be paid in installments according to the due dates that are listed by the income tax department.

Who must pay Advance Tax?

Businesses, Salaried, or freelancers

In case, in a financial year, the total tax liability is Rs 10,000 or exceeds it, one has to make an advance tax payment. This is applicable to all the taxpayers whether they are salaried, businesses or freelancers. Only Senior citizens (60 years or above) need not pay advance tax, however, they should not run any business.

Those taxpayers who have selected the presumptive taxation scheme will have to pay the entire amount of their advance tax in a single installment either on or before the due date. They also can clear all their tax dues by the due date. 

Professionals and Presumptive income:  Independent professionals like lawyers, doctors, architects, etc. fall under this scheme u/s 44ADA. They will have to pay the entire amount of advance tax liability in a single installment either on or before the due date. They have the option of clearing the entire amount due by the specified due date.

Advance Tax Payment Procedure

The advance tax payment procedure is quite simple. The steps to make the payment online are listed below:

Step 1: 

Make sure that your bank which has online banking facility also has a provision for payment of income tax.  If it does not have this facility, you will not be able to pay your tax online. 

Step 2:

In case your bank is listed in the list of banks which have provision for the payment of income tax, you can move on to the website of TIN i.e. http://www.tin-nsdl.com/ and log in using your account credentials. In case you don’t have an account, you can register yourself by providing the required details.

Step 3: Once on this website, go to section -services and click on “e-payment”

Step 4: Select the Challan No./ITNS 280/ 281

Step 5: Choose the type of tax which is applicable i.e., 0020: Income Tax on Companies or 0021: Income Tax (Other than companies)

Step 6: Select the Assesment Year 2019-20

Step 7: Select the proper type of tax which is applicable i.e. 100 (Advance tax).

Step 8: Furnish the details of your PAN Card. 

Step 9:  Check all the details and make sure that the tax liability has the correct details and are against your own name.

Step 10: Once the above steps are done, the website will redirect you to your bank’s online facility when you click PROCEED. You can now make the payment and make note of the particular Transaction ID. Also, keep the challan receipt for reference, as it will be useful when claiming the Income Tax Return

Advance Tax Payment Challan

Additionally, in case you are unable to make the advance tax payment online, you have to get the payment challan for advance tax filled and get it submitted with the respective bank along with the correct amount that has to be paid

Advance Tax Calculation

The advance tax has to be paid by the taxpayer either on or before the specified due dates as this will avoid any auditing by Income Tax Assessing Officers. In case you fail to abide by the due dates for advance tax payments, a notice will be served to you from the Income Tax Department.

Self Assesment

Prior to making the payment for advance tax, you can make an estimate of your advance tax liability. From your tax liability, TDS will get deducted and then you can calculate the advance tax liability from the balance amount. Tax reliefs as per sections 90 or 90A will be deducted, along with the tax credit that is permitted to be set off as per sections 115JAA or 115JD that will be deducted from your advance tax liability as well.

Advance Tax Calculator

There is an advance tax calculator provided by the government 

Assesment by the Income Tax Officer

If the taxpayer has not complied with the payment of advance tax or even has paid a lesser amount than the advance tax which is due for his/her income, then an order can be issued by the Income Tax Officer to the taxpayer notifying him to clear the due advance tax.  

If the advance tax payment that has been indicated by the income tax assessing officer is more than the estimated advance tax as per the income, the taxpayer can furnish and submit their own estimate of their current income. The intimation must be sent through the Form 28A. 

The advance tax has, therefore, become a very important procedure of Income Tax Filing.