Income Tax: In India, individuals, companies, and businesses can opt to pay their income tax in advance instead of waiting until the end of the financial year to pay a lump sum. This is known as advance tax and it allows for better financial planning and management of tax liabilities.
Salaried individuals in India typically have their advance tax payments managed through Tax Deducted at Source (TDS) by their employers. However, other sources of income, such as interest on savings accounts or fixed deposits, rental income, capital gains or bonds, can increase the tax liability. Therefore, it’s important to estimate one’s tax liability in advance to ensure that all sources of income are accounted for and that the appropriate amount of tax is paid in a timely manner.
If an individual’s tax liability exceeds Rs 10,000 in a given financial year, they are required to make advance tax payments in quarterly installments. These installments are due in the months of June, September, December, and March, and are designed to help taxpayers manage their tax liabilities throughout the year, rather than waiting until the end of the year to make a single lump sum payment.
Self Assessment Tax refers to the tax paid by a taxpayer on their taxable income after deducting any advance tax and Tax Deducted at Source (TDS). This tax is calculated by the taxpayer themselves, based on their income and deductions, and is typically paid after the end of the financial year, once the final tax liability has been determined. Self Assessment Tax is an important part of the tax system in India, as it ensures that taxpayers pay the correct amount of tax and avoid any penalties or fines for underpayment.
When an individual or entity in India calculates their total tax liability for a given financial year and finds that the amount already paid through TDS or advance tax is less than what is owed, they may choose to pay an additional tax known as self assessment tax. This is an important part of the tax system that helps ensure that taxpayers pay the correct amount of tax to the government. Self assessment tax is paid by the taxpayer themselves after calculating their total tax liability, and is intended to cover any shortfall in tax payments that may have occurred throughout the year.
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The amount of self-assessment tax that an individual or entity in India is required to pay is calculated based on the applicable income tax rates and rules for the relevant financial year. The taxpayer can make the payment online through the income tax department’s website or by visiting a designated bank branch.
The process of paying self-assessment tax is relatively straightforward and can be completed easily with the help of the income tax department’s online platform or by visiting a bank branch. By paying self-assessment tax on time, taxpayers can avoid penalties and ensure that they are meeting their tax obligations in a timely and accurate manner.
Any tax payment made on or before March 31st of a financial year is treated as advance tax paid for that year. To make an advance tax payment, taxpayers can deposit the required amount through challan ITNS 280, by indicating the relevant column for Advance Tax.
This process ensures that the tax payments made by the taxpayer are properly accounted for and credited towards their overall tax liability for the relevant financial year. By making advance tax payments on time and in the correct manner, taxpayers can avoid any penalties or fines that may be imposed for underpayment or late payment of taxes.
Who Is Liable To Pay Advance Tax?
According to Section 208 of the Income Tax Act in India, any individual or entity whose estimated tax liability for a given financial year is Rs 10,000 or more is required to pay their taxes in advance through a system known as “Advance Tax”. This provision is in place to ensure that taxpayers are able to manage their tax liability throughout the year, rather than waiting until the end of the year to make a lump sum payment.
By making advance tax payments in installments throughout the year, taxpayers can ensure that they are meeting their tax obligations and avoiding any penalties or fines that may be imposed for underpayment. This part of the tax system in India is designed to promote timely and accurate payment of taxes and help taxpayers avoid any unnecessary complications or issues with the tax authorities.
How is Advance Tax Calculated And Paid?
Advance tax is calculated as given below:
a) In case of all assessees (other than the eligible assessees as referred to in section 44AD and 44ADA of the Income Tax Act):
At least to 15% On or before June 15
At least to 15% On or before June 15
At least to 45% On or before September 15
At least to 75% On or before December 15
100% On or before March 15
b) In case of eligible assessee as referred to in section 44AD and 44ADA: 100% On or before March 15.
The presumptive taxation scheme of section 44AD is designed to give relief to small taxpayers engaged in any business (except the business of plying, hiring or leasing of goods carriages referred to in section 44AE).
The presumptive taxation scheme of section 44AD can be adopted by following persons :
1) Resident Individual
2) Resident Hindu Undivided Family
3) Resident Partnership Firm (not Limited Liability Partnership Firm)
A person resident in India engaged in following professions can take advantage of section 44ADA:-
1) Legal
2) Medical
3) Engineering or architectural
4) Accountancy
5) Technical consultancy
6) Interior decoration
7) Any other profession as notified by CBDT
How Is Self-Assessment Tax Calculated And Paid?
To calculate self-assessment tax in India, taxpayers must first fill out their Income Tax Return (ITR) form and provide details of any tax deducted at source (TDS) and advance tax payments made. Once the form is submitted, the system calculates the taxpayer’s income and checks whether any additional tax is still payable.
If so, the taxpayer must pay the amount due and provide the relevant challan details in the ITR form before submitting it to the tax authorities. This process helps ensure that taxpayers are meeting their tax obligations and avoiding any penalties or fines for underpayment or late payment of taxes. By accurately calculating and paying their self-assessment tax, taxpayers can maintain compliance with the tax system in India and avoid any unnecessary complications or issues with the tax authorities.
Who Is Not Liable To Pay Advance Tax?
Senior citizens who are residents and have no income from business or profession are not required to pay advance tax. This exemption applies to individuals who are 60 years of age or older during the relevant financial year. These taxpayers are not required to make any advance tax payments and can instead pay their tax liability at the time of filing their Income Tax Return (ITR). This provision provides relief to senior citizens who may have limited income and resources, and helps ensure that they are not burdened with unnecessary tax obligations or penalties.
How do I pay my advance tax payment?
To make an advance tax payment in India, taxpayers can use any of the following methods:
1. Online payment via net banking or through the Income Tax Department’s website using Challan 280.
2. Physical payment by filling out Challan 280 at any designated bank branch and depositing the amount due.
3. Electronic Clearing Service (ECS) for taxpayers who have a bank account with authorized banks.
4. Payment using the National Automated Clearing House (NACH) for taxpayers who have a savings account with authorized banks.
It is recommended to keep a record of the payment made for future reference.
What is the due date for payment of advance tax?
In order to avoid incurring a 1% monthly interest charge, it is recommended to pay advance tax in four instalments before the end of the financial year. These instalments are due on the 15th of June, September, December, and March. However, if the due date has already passed and advance tax has not been paid, it is still possible to make the payment, albeit with the added interest charge. Therefore, it is advisable to pay advance tax on time to avoid any additional costs.
How to calculate advance tax payment?
To ensure timely and appropriate payment of advance tax, taxpayers are required to follow a predetermined schedule. The schedule dictates that 15% of the total tax liability must be paid on or before June 15th. Subsequently, a further 45% of the tax liability is expected to be paid by September 15th. Finally, to avoid incurring any additional charges, a minimum of 75% of the total tax liability must be paid on or before December 15th. By adhering to this payment schedule, taxpayers can effectively manage their tax obligations and avoid any financial penalties.
Do Salaried person need to pay advance tax?
Salaried employees need not worry about paying advance tax separately, as their employer is responsible for deducting tax at source, commonly known as TDS. However, if an individual has additional sources of income besides their salary, they may be required to pay advance tax. In such cases, it is essential to stay informed about the applicable tax laws and payment schedules, to ensure timely payment and avoid any penalties.