If the total tax liability on non-salary income, after deducting TDS and TCS, exceeds ₹10,000, this amount must be paid in four installments throughout the year. This liability is calculated differently depending on the source of income.
Income Tax: The advance tax filing deadline for this quarter is December 15th. Individuals with income from sources other than salary, such as capital gains, interest, dividends, or business income, are required to pay tax on these incomes throughout the year, without waiting to file their income tax return (ITR) at the end of the year. Advance tax ensures that the government receives tax payments on time and allows individuals to avoid paying large amounts at once or incurring interest penalties.
When is payment required?
If the total tax liability on non-salary income, after deducting TDS and TCS, exceeds ₹10,000, this amount must be paid in four installments throughout the year. This liability is calculated differently depending on the source of income.
When is estimation necessary?
If you have income from business or profession, you must estimate your estimated taxable income at the beginning of the financial year and pay advance tax accordingly. However, in the case of capital gains and dividend income, advance tax is not required until the income is actually received. Tax on these incomes is payable in the quarter in which they are received, as they are difficult to estimate.
Advance Tax Installment Deadlines
· First installment: By June 15, 15% of the estimated tax liability.
· Second installment: By September 15, 45% of the estimated tax liability.
· Third installment: By December 15, 75% of the estimated tax liability.
· Fourth installment: By March 15, 100% of the estimated tax liability.
Do senior citizens also have to pay advance tax?
Senior citizens above 60 years of age, whose income is not from business or profession, are exempt from paying advance tax. However, if a senior citizen has income from business or profession, advance tax rules will still apply.
What penalty will be imposed for missing an installment?
If an advance tax installment is not deposited on time, the individual will have to pay 3% interest on the missed installment. Suppose, out of a total advance tax of ₹1 lakh, you had to deposit ₹15,000 by June 15th. If you fail to do so, the tax department will charge interest on the outstanding amount at the rate of 1% per month for three months, totaling 3%. In this case, you will have to pay ₹450 as interest on the ₹15,000 not deposited on time. Even if you deposit the amount later, the three-month interest will still apply for the missed installment.
