Advance Tax Planning and Calculation -
F. Yr. 2023-24

Under the Income Tax, every person is liable to pay advance tax during the financial year when the net tax liability exceeds Rs. 10000/-. 

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The net tax liability is the amount of tax calculated on total income of the person after deducting any TDS, TCS during the year. 

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Thus when the tax payable on the total income of any person during a particular financial year exceeds Rs.10000/- (after considering the tax deducted at source), he is required to pay the entire tax in advance during the year in installments. 

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Who is liable to pay Advance Tax ?

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Advance tax is to be paid by every person i.e. Individual, HUF, Firm, LLP, Company or any other person in case the tax liability exceeds Rs.10000 during the year. Hence there is no exemption to any person in the payment of Advance Tax. 

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How the Advance Tax has to be paid ?

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As per Income Tax laws, the advance tax has to be paid in 4 Installments i.e. 

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1. On or before 15th June 

2. On or before 15th Sept.

3. On or before 15th Dec.

4. On or before 15th March

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How much Advance Tax is to be paid? 

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As stated above, the advance tax has to be paid on 4 installments. The amount of advance tax to be paid in each 

installments is as under : 

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1. On or before 15th June           -       15% of Total estimated Tax

2. On or before 15th Sept.          -        45% of Total estimated Tax less the advance tax already paid

3. On or before 15th Dec.           -        75% of Total estimated Tax less the advance tax already paid 

4. On or before 15th March        -        100% of Total estimated Tax less the advance tax already paid

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However, for those assesses who declares income under presumptive taxation scheme u/s 44AD and 44ADA has been given option to pay the entire advance tax on or before 15th March i.e. they are not required to pay the I, II & III Installments. 

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Income Estimation for the purpose of Advance Tax?

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The Current year Income has to be estimated for each category of Income i.e. Salaries, House Property, Business Income and Income from Other Sources for full year and accordingly the relevant advance tax for the appropriate Installments have to be paid. 

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However, for the following Incomes, there is no need of estimation of full year Income i.e. 

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(1) IIncome from Capital Gains 

(2) Dividend Income 

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For above Income, the advance tax is to be paid when the same is received i.e. for the Quarter in which the Income accrues and in subsequent quarters. 

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Also in case of Presumptive Income u/s 44AD and 44ADA, the whole of advance tax is to be paid on or before 15th March only and not before that. 

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Is there any Interest or Penalty for Non-payment of Advance Tax? 

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There are two types of Interest leviable under Income Tax for non-payment of Advance Tax. 

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1. Interest u/s 234B

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This interest is payable when a person does not pay 90% of his total estimated tax as advance tax till 31st March of the year. The interest is levied on the shortfall of the advance tax from 1st April till the date of regular assessment of Income @ 1% per month. 

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2. Interest u/s 234C 

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Since the entire advance tax is to be paid on 4 installments as narrated above, any shortfall on the payment will attract interest @ 1% for the month or part of month. i.e. if 15% of advance tax is not paid up to 15th June, interest for the period june to Sept. i.e. 3 months @ 1% per month will be levied on the shortfall till 15th Sept.

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Similarly, if 45% of total advance tax is not paid up to 15th Sept., interest for the period Sept. to Dec. i.e. 3 months @ 1% per month will be levied on the shortfall till 15th Dec. 

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Similarly, if 75% of total advance tax is not paid up to 15th Dec.., interest for the period Dec. to March i.e. 3 months @ 1% per month will be levied on the shortfall till 15th March. 

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and if 100% of advance tax is not paid till 15th March, interest @ 1% for the month of March is payable till 31st March. 

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However, no interest is payable if the advance tax is on account of shortfall or underestimation due to Income from Capital Gains and Dividend Income. These income are to be taken on receipt basis and the advance tax is to be paid after these Incomes are actually received. 

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