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Everything you wanted to know about Advance Tax and Penalties under it, With Automated All in One TDS on Salary for Govt & Non-Govt Employees for F.Y. 2017-18 with Arrears Relief Calculator including Form 10e

Are you paying your income tax only at the end of the financial year ? If your answer is YES, then understand that you are doing it in wrong manner. Today we will learn about Advance Tax which is not widely understood and its quite important thing to know. I know that majority of the people don’t follow this process and pay the income tax at the end of the year only (in fact on the last minute many times), But today you should understand if advance tax is applicable in case your case or not.

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What is Advance Tax ?
As the name suggests, Advance Tax is part payment of your income tax liability in advance. So instead of paying everything at the end of the year, you pay it 3 times in a year in parts. The concept of Advance tax exists because govt wants you to pay income tax as you earn month after month and not at the end of the year. Advance tax is to be paid when your annual tax liability exceeds Rs 10,000 overall .
However important point is that Advance tax is applicable on your Income from sources other than your Salary like
  • Interest on FDs or Savings bank deposits exceeding Rs. 10,000/-
  • Rental income on House Property/properties
  • Capital Gains on sale of Mutual Funds or Shares
  • Income from any other sources not mentioned as above.
Which means that if you are a salaried employee who does not have any other income source and if your employer deducts TDS regularly, then Advance Tax is not applicable in your case. You don’t need to worry about it.
On which date you have to pay Advance Tax ?
You have to pay advance tax 3 times in a year, which is 15th Sept , 15th Dec and 15th Mar and you should be paying not less than 30% , 60% and 100% of your income tax liability before these dates. Below picture makes it clear for you.
Which means that if your income tax liability for a year is Rs 1,00,000 , then you should pay advance tax of Rs 30,000 by 15th Sept, another Rs 30,000 by 15th Dec and rest Rs 40,000 by the end of 15th Mar

What if I don’t pay Advance Tax on time ?

If Advance Tax is applicable in your case, then you should be paying it on time, but if you don’t pay it on time, then you can pay it on the next due date along with the interest. So those who have not paid the first installment (i.e. September 15) of Advance Tax (if applicable to you), then you can pay it together with second installment (on of before 15th Dec), but with interest on the first installment for deferment of the same by three month and if you are not paying it even on Dec 15th , then you can pay it by the end of the year along with the interest.
You will be charged with penalty under Sec 234B and 234C in case you don’tpay your advance tax on time. Let me quickly share what is sec 234C and sec 234B
Understanding Penalty under Section 234C
Lets first understand sec 234C. Under this section, if you don’t pay your installments of advance tax on time, then you are charged 1% of simple interest for next 3 months on the amount of shortfall. So this is the penalty to be paid because of DELAY!
Understanding Penalty under Section 234B
If your total advance tax paid by last due date (15th Mar) is less than 90% of your advance tax liability, then you will have to pay 1% interest on the balance amount each month until you complete the payment. which means that suppose your income tax liability is Rs 1,00,000 in total and if you have not paid anything upto 15th Mar, then you will be charged 1% on the outstanding balance (Rs 1 lac in this case) each month, unless you pay it, so if you pay in June , then you will be charged for 3 months penalty and it would be Rs 3,000 in total other than penalty under sec 234C.
Lets understand sec 234B and 234C with help of case studies. Lets assume that your total Income Tax payment for the year would be Rs 50,000, then as per rules of Advance tax, you should be paying
  • Rs 15,000 by 15th Sept
  • Another Rs 15,000 by 15th Dec
  • And Rest 20,000 by 15th Mar
Now imagine you don’t pay any advance tax , then how much penalty you will pay under sec 234B and 234C under various situations ? Below I have explained 4 situations where you pay your full income tax on different dates. Check out how much penalty you will have to pay under these situations !

How to pay Advance Tax ?

Now comes the final question, that how can you pay your advance tax ? Most of the people are worried on this, as they feel that paying advance tax would be very tough or involves lots of hassles, but thats not correct. You can make payment of your advance tax in less than 5 min.
There are mainly two ways of payment advance tax.
1. Offline option
Almost all the banks have tie up with govt for accepting the advance tax from the taxpayers, you can go to the banks which have the tie up and fill up the challan number 280 and pay your advance tax to them.
1. Online Payment of Advance Tax
The other faster way to make payment online. Here is how it works
2. Choose Advance Tax option and other details and make payment
When come to the next page, you will have to choose various details here. Make sure you choose your
  • PAN Number (of utmost importance)
  • Advance Tax (under Type of Payment)
  • Email, Phone and Address details
  • Assessment year 
Once you choose these details, you can then click on “proceed” and it will connect you to the Bank which you had selected, It will show you your NAME on the next page, so that you can confirm there was no mistake from you end, then you can make the payment online, and you will be able to print the receipt online (you will also get it on email)

Are you paying your Advance Tax

I guess, you are now clear about the advance tax and how its calculated . Its a good practice to pay your advance tax on time and do not delay it because it can mean a penalty of few thousand rupees in most of the cases. I know its tempting to delay the headache and complete the payment once in a year, a lot of people might be ok with paying some penalty, but then you also invite related problems with it. Pick your choice.

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