A Guide to Advance Tax Payment in India: Make Things Easier
“One who does not advance goes backward.”
Paying taxes on the capital gains earned from renting or selling a property can be a hassle. With so many complexities and changing tax rules, it is best to follow them before the deadlines. Advance Tax Payments can make things much more manageable for individuals. But it is important to get important things done in advance. As the Indian Finance Act was amended in the year 2022, it is crucial to know how to make your advance tax payments more manageable. In this article, we are discussing just that!
The Real Deal About Tax Payments In India
Advance tax payment in India is a process by which individuals and businesses pay a portion of their expected tax liability. Only the catch is that this is done in installments throughout the year rather than paying the total amount at the end of the fiscal year. This system helps taxpayers manage their finances more efficiently. Moreover, it also allows taxpayers to avoid penalties for underpayment of taxes. Advance tax provisions apply to individuals (and businesses) in India who owe more than 10,000 rupees in tax for the fiscal year. It applies to all those who have different sources of income in addition to their wages. This includes income from sources such as:
- income earned from rental property
- capital gains from the sale of property
- Income from business or salary
- gains from shares, lottery winnings
- revenues from fixed deposits and more
For instance, let’s say that you are a resident of India, and your total tax liability for the year is expected to be more than INR 10,000. In this case, you are required to pay advance tax. This applies to salaried employees, self-employed individuals, and businesses or startups. If individuals fall under the advance tax provisions, they may be required to pay advance tax. It is important to know the tax rules before investing in a property that may result in capital gains and other income.
The Benefits Of Paying Advance Tax
There are several benefits to paying advance tax in India. This can be done online or at any banking institution like ICICI, HDFC, Yes Bank, and others. The obligation to pay advance tax and the specific timeline for doing so will depend on the individual’s circumstances and the amount of tax they owe. Here’s how it can be beneficial to pay advance tax:
Less Stress At The Year End-
Advance tax payments help you avoid the rush and stress of paying your entire tax bill at the end of the fiscal year. In India, the fiscal year starts on April 1 and ends on March 31. Thus, the assessment year 2023-24 will be the review year for the fiscal year 2022-23. By paying installments throughout the year, you can spread out the burden of tax payments and manage your cash flow more effectively.
Saves Any Additional Costs-
Another advantage of advance tax payments is that it helps you to avoid penalties for underpayment of taxes. You may be subject to interest charges if you do not pay your full tax liability by the due date. There can also be other penalties. By paying advance tax, you can ensure that you meet your tax obligations and avoid these additional costs.
The Process Of Paying Advance Tax
How do you pay advance tax in India? We are getting right into it. Here is a step-by-step guide:
Calculate your expected tax liability for the year-
For paying the advance tax payments, you first need to determine your expected tax liability for the year. You can do this by using the tax calculator provided by the Indian government or by consulting with a tax professional.
Determine your advance tax installments-
Once you have calculated your expected tax liability, you can determine how much you need to pay in advance tax installments. According to the Indian tax code, the advance tax installments for all assessees (except the eligible assessees referred to in section 44AD or section 44ADA) are due on the following dates:
- June 15- 15% of the advance tax should be paid on or before June 15 of the financial year.
- September 15- 45% of the advance tax (less tax already paid) should be paid on or before September 15.
- December 15- 75% of the advance tax (less tax already paid) should be paid on or before December 15.
- March 15- 100% of the advance tax (less tax already paid) should be paid on or before March 15
Make your advance tax payment-
There are several ways to carry out advance tax payments in India, including online, through a bank, or by mailing a check to the Indian tax department. It is important to keep track of your payment receipts, as these will be required when you file your income tax return (ITR).
By following these steps, you can make the process of advance tax payments in India much easier and more efficient. By staying organized and keeping track of your expenses, you can avoid penalties and ensure that you meet your tax obligations.
What Happens In case Of Penalty
If an individual misses the due date for paying their advance tax or pays less than the required amount (which is typically 30% of their overall tax liability) by the first deadline, they may be subject to a penalty. This is charged in the form of interest on the “unpaid amount”.
This interest amount is:
- calculated at a rate of 1% per month
- applied to the unpaid amount
- for a period of three months
This penalty is intended to encourage taxpayers to pay their advance tax on time and in the correct amount. In other words, if an individual fails to pay their advance tax on time or does not pay the required amount, they will be charged interest on the unpaid amount at a rate of 1% per month for three months.
Individuals Exempt From Advance Tax Payments
As we already know that advance tax payments are tax amounts that are required to be made by certain taxpayers during the course of the year rather than paying the full amount at the end of the tax year. But there are certain individuals who are not required to make advance tax payments. These individuals include:
The resident senior citizens who are 60 years of age or older during the financial year are exempted from the advance tax payments.
Individuals With No Income Source-
This also includes individuals who do not have any income from business or profession. These individuals are not liable to pay advance tax.
Individuals Opting For Presumptive Tax Scheme-
The taxpayers who have opted for the presumptive taxation scheme under section 44AD or section 44ADA are required to pay 100% of their advance tax by March 15. Thus they are exempted from advance tax payments.
The individuals who opt for presumptive tax schemes are required to pay their entire tax liability in advance rather than making payments throughout the year. You must gain more information on the presumptive basis tax payments in the case of certain eligible individuals and businesses as well.
The Key Takeaways
The earlier one gets rid of the liabilities, the better. The advance tax payments allow you to stay worry-free about your capital gains from the sale of property in 2023. If you want to understand this better, then get in touch with a realtor at CSRealty!
Our professionals not only guide homebuyers on where to find the best homes in Delhi NCR, Gurgaon and Noida, but they also give you the best advice to make your property sales better and faster. For simplified tax payments and good gains on property, consult with our realtors today.
Visit: www.csrealty.in to view apartments with pictures and details, or contact us at 844 844 9131 to get your free brochure and list of apartments.