Advance tax is one of the direct tax payment methods proposed by the I-T Department of India to make tax payment convenient for assesses. This department also declared that only about 1.46 Crore individuals pay tax on their income, among which over 1 crore come under the income slab of Rs. 5 lakh to 10 lakh.
Moreover, the advanced tax makes I-T payment easier, especially for individuals with higher tax liabilities, and due to this, advance taxation is also known as ‘pay as you earn’ tax. For a better understanding of this tax payment system, here’s a look at a few essential details about it.
Who all need to pay advance taxes?
Any taxpayer whose tax liabilities is Rs.10,000 and more within a financial year is required to pay advanced tax, as per the guidelines issued by the I-T Department of India. Individuals including salaried, businesspersons, freelancers, and corporate, all are necessarily required to complete advance taxation filing. However, senior citizens are exempted from this mode of taxation if they lack any source of income.
Moreover, if you are planning to opt for loans with tax benefits, for example, a home loan, you must gain an understanding regarding saving tax when you take a home loan. It can reduce the burden of tax liabilities to some extent. Nonetheless, to avoid any penal interest, you should also revise your estimated tax liabilities regularly and make an advance payment as and when required.
What are the due dates for the payment of advance taxes?
The payment layout for advanced tax is neatly organised. For instance, all the taxpayers need to pay 15% of their tax liabilities on or before 15th March, and at least 45% of the total tax amount has to be paid within 15th September. Consequently, by 15th March of the following financial year, advance taxes need to be paid in full.
How to calculate advance tax?
The advance tax payable amount is decided after assessing an individual’s estimated income during a financial year. In this regard, he/she needs to calculate the tax amount after taking into account TDS deduction, MAT/AMT credit, and other tax exemptions. For instance, if an individual has availed a home loan, he/she has to calculate the advance tax after deducting any applicable deductions under section 80C of the Income Tax Act.
With this understanding of what is advance tax and how to calculate and file it, take a look at other essential details regarding its payment.
What are the penalties for non-payment of advance tax?
According to section 234B of the I-T Act, if you fail to pay the entire advanced tax liability or at least 90% of it, an interest of 1% will be charged on the remaining payable tax liability. It will thence be considered as tax default, and the specified interest will be charged from 1st April of the next financial year until you pay off the self-assessment tax.
What are the home loan tax benefits available under advance tax deductions?
One of the benefits of advance tax is taxpayers can pay their tax liabilities through small instalments that can effectively regulate cash outflow. Furthermore, when borrowing money to meet different financial requirements, for example, home loans for house purchase, you can enjoy some attractive advance tax benefits and save a considerable amount. For that, you must know in detail about home loan tax exemptions and benefits every new and existing borrower should have on their fingertips.
Several top financial institutions also offer home loans up to Rs. 3.5 crore with a flexible repayment schedule.
They also provide pre-approved offers so that the entire process of loan approval becomes hassle-free and less time-consuming. This offer is available for several financial products like home loans, loans against property, etc. Moreover, you can also check your pre-approved loan offer simply by submitting your name and contact number.
Nonetheless, advanced tax is a mandatory liability on the part of taxpayers, and they need to look for the ways to reduce this liability employing different tax-exemption options available in India right now. It thus helps keep their income tax payment requirements streamlined.