The deadline to pay the third instalment of advance tax is December 15. All those who are eligible to pay advance tax but fail to do within the deadline will be subjected to penalties. Generally, taxes are deducted/collected at source as TDS when an income is paid but even salaried individuals may be liable to pay advance tax.
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What is advance tax?
The tax which is paid within the same financial year in which the income is earned is called advance tax. It is paid in four instalments and not in a lump sum at the end of the financial year.
All taxpayers, salaried, freelancers and businesses, whose estimated income results in a tax liability of more than Rs 10,000 in the financial year must pay advance tax.
Also, individuals who have sources of income other than their salary are required to pay advance tax. This includes income from rent, capital gains, fixed deposits, lottery winnings, etc.
Exemptions
Resident senior citizens (an individual of the age of 60 years or above) not having any income from business or profession are not liable to pay advance tax.
Salaried persons who don’t have any income other than salary also need not pay advance tax instalments as employers are required to deduct the applicable tax from the monthly salary.
Advance tax payment deadline
Eligible taxpayers are required to pay their annual estimated advance tax liability in four instalments of 15 percent, 45 percent, 75 percent, and 100 percent, on or before June 15, September 15, December 15 and March 15, respectively in the current financial year.
Taxpayers who opted for the presumptive taxation scheme (PTS) of Section 44AD or Section 44ADA are liable to pay 100 percent of advance tax by the last deadline of March 15.
Penalty on late payment
If taxpayers pay less than 90 percent of the assessed tax within the deadline, then an interest of 1 percent every month under Sections 234B and 234C of the Income Tax Act is charged.
The interest is computed as 1 percent simple interest on the defaulted amount for every month until the complete tax liability is paid off. The same interest penalty is applicable if the tax is not paid by the second or third deadline.
However, Section 234C does not impose interest as a penalty under events where the taxpayer underestimates or fails to evaluate the amount of capital gain tax or in case of speculative income such as lottery money, gambling income, etc.
(Edited by : Sudarsanan Mani)
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