The last installment of Advance Tax for the financial year 2024-25 is due by March 15, 2025. The Income Tax Department urges individuals and businesses to complete their payments on time to ensure compliance and avoid penalties.
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Timely advance tax payments also contribute to the ‘Viksit Bharat Movement’, supporting India’s economic self-reliance and development.
What is Advance Tax?
Advance tax follows the “pay-as-you-earn” system, where individuals and businesses pay taxes in installments throughout the financial year instead of a lump sum at the end. It applies to taxpayers whose total tax liability exceeds a government-specified threshold.
Also Read: Tax Experts Urge Swift Action on 5.49 Lakh Pending Appeals at CIT-A, NFAC
Who Needs to Pay Advance Tax?
Advance tax is applicable to:
- Salaried individuals with additional income from sources like rent, capital gains, or business profits.
- Self-employed professionals such as freelancers, doctors, lawyers, and consultants.
- Businesses, including sole proprietorships, partnerships, and companies.
- Senior citizens (aged 60 and above) are exempt if they do not have business income.
Advance Tax Payment Schedule
Taxpayers must follow the installment schedule set by the authorities:
- 15% of total tax liability – by June 15
- 45% of total tax liability – by September 15
- 75% of total tax liability – by December 15
- 100% of total tax liability – by March 15
For businesses under the Presumptive Tax Scheme, the full amount is typically paid in a single installment by March 15.
How to Calculate Advance Tax?
To compute your advance tax liability:
- Estimate total income (salary, business profits, rental income, interest, or capital gains).
- Deduct exemptions and deductions (under Section 80C, 80D, etc.).
- Calculate taxable income after deductions.
- Apply the relevant income tax slab rates to compute total tax liability.
- Subtract TDS (Tax Deducted at Source) already paid.
- Pay the remaining tax liability in installments as per the due dates.
How to Pay Advance Tax?
Taxpayers can pay advance tax through the following methods:
- Online: Via the government’s tax portal using net banking, debit/credit cards, or UPI.
- Offline: By submitting the tax challan at designated bank branches.
Penalties for Non-Payment or Late Payment
Failure to pay advance tax or making short payments may result in interest penalties:
- Section 234B: Interest is charged if at least 90% of total tax liability is not paid before March 31.
- Section 234C: Interest applies for missing installment deadlines or short payments.
Benefits of Paying Advance Tax
- Avoids last-minute tax burden by distributing payments throughout the year.
- Prevents interest and penalties on delayed payments.
- Helps manage cash flow efficiently for businesses and individuals.
- Ensures compliance with tax laws and government regulations.
Final Reminder
Taxpayers must ensure that the final installment of advance tax is paid by March 15, 2025, to stay compliant and avoid penalties.