Advance Tax is the payment of taxes in advance instead of a lump sum amount at the end of the year. Advance Tax Payment method is also called pay as you earn tax. Under advance tax payment, the taxpayer makes an advance payment of the tax on an estimated total income. Through the implication of advance tax, Indian government collects the tax throughout the year in installments. This pay-as-your-earn scheme is provided by the Income Tax Department.
In this article, we shall discuss who should pay advance tax, what its due dates are, and how to calculate it.
Who should pay Advance Tax?
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Advance tax applicability – it is applicable to the taxpayers having an annual income of INR 10,000 or more. Hence, all including salaried, freelancers, and businessmen should pay tax in advance. Nonetheless, tax in advance is not paid by the salaried employees usually since their employers deduct it in advance as TDS. However, in case of having an extra source of income, he has to pay tax in advance on it.
Senior citizens of age 60 years or more who do not run a business are exempted from advance tax payment.
What is the Presumptive Taxation Scheme?
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To reduce the burden of businessmen of maintaining regular books of accounts, the government of India has introduced the Presumptive Taxation Scheme. By adopting this taxation scheme, the businessmen can declare their income at a prescribed rate. This taxation scheme is divided into advance tax sections – Section 44AD and Section 44AE.
Businessmen who can adopt presumptive taxation scheme under Section 44AD are:
- HUF – Hindu Undivided Families
- Resident Individual Taxpayers
- Partnership firms except for Limited Liability Partnership
Also, these individuals or businesses should enjoy an annual turnover of not more than INR 2 crores.
What are the Advance Tax Due Dates?
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The advance tax dates for salaried, freelancers, and businessmen are:
| Advance Tax Due Date | Advance Tax Payable |
| June 15th (On or before) | Up to 15% |
| September 15th (On or before) | Up to 45% |
| December 15th (On or before) | Up to 75% |
| March 15th (On or before) | Up to 100% |
The advance tax due dates for the taxpayers who have opted for presumptive taxation scheme is March 31st. They have to pay 100% of the advance tax.
How to Calculate Advance Tax?
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Tax payment in advance can be calculated in simple ways. You can calculate it on your current income at the current tax rates for the financial year. You can also take the tax paid in the previous financial year to calculate your tax for the current financial year. However, you can always take the help of professionals as well.
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