📌 Introduction
When it comes to managing your tax obligations efficiently, advance tax payments play a vital role in India's income tax system. Often called 'pay-as-you-earn tax', advance tax helps the government receive income tax dues throughout the year rather than at year-end.
Whether you're a salaried individual with extra income, a freelancer, or a business owner, this blog will help you understand the importance of advance tax, how to calculate it, and how to avoid penalties in FY 2024-25.
✅ What is Advance Tax?
Advance Tax is the income tax paid in parts during the financial year before the end of the assessment year. According to Section 208 of the Income Tax Act, individuals with an estimated tax liability of ₹10,000 or more in a year must pay it in advance.
🧾 Who Needs to Pay Advance Tax?
| Taxpayer Type | Applicability |
|---|---|
| Salaried Individuals | Only if they have income other than salary (e.g. interest, rent, capital gains) |
| Self-Employed Professionals | Yes |
| Businesses | Yes |
| Freelancers | Yes |
| NRIs earning in India | Yes |
| Senior Citizens (No Business Income) | ❌ Not required |
📢 Senior citizens above 60 years without business income are exempt from paying advance tax.
📊 Importance of Advance Tax
🔹 1. Legal Compliance
Avoid interest penalties under Sections 234B and 234C of the Income Tax Act.
🔹 2. Better Financial Planning
Paying in installments helps manage cash flow better than paying a lump sum at the year-end.
🔹 3. Reduced Year-End Stress
Spreads tax burden throughout the year, reducing last-minute rush and errors.
🔹 4. Supports Government Finances
Advance tax helps the government maintain steady revenue for infrastructure and welfare.
📅 Advance Tax Due Dates for FY 2024-25
| Due Date | Minimum % of Tax Payable | Applicable For |
|---|---|---|
| 15th June 2024 | 15% | All taxpayers |
| 15th September 2024 | 45% (Cumulative) | |
| 15th December 2024 | 75% (Cumulative) | |
| 15th March 2025 | 100% (Cumulative) |
🧾 Presumptive Taxpayers (44AD / 44ADA): Can pay 100% of tax in one installment by 15th March 2025.
🧮 How to Calculate Advance Tax (Step-by-Step)
Step 1: Estimate Total Income
Include:
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Salary
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Business or freelance income
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Capital gains
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Rental income
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Interest on savings, FDs, bonds, etc.
Step 2: Calculate Gross Tax Liability
Use applicable income tax slab rates (including surcharge and cess).
Step 3: Subtract Eligible Deductions
Under:
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Section 80C (LIC, PPF, ELSS, etc.)
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Section 80D (Health Insurance)
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Section 24(b) (Home Loan Interest)
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Section 10 (Exempt Allowances)
Step 4: Subtract TDS / TCS
Reduce the tax already deducted at source.
Step 5: Arrive at Advance Tax Payable
If net payable tax exceeds ₹10,000, you are liable for advance tax.
🧑💼 Example – Advance Tax for a Freelancer
| Income Type | Amount (₹) |
|---|---|
| Freelance Income | 12,00,000 |
| Bank Interest | 50,000 |
| Total Income | ₹12,50,000 |
Tax on ₹12,50,000 = ₹1,87,500 (including cess)
Less: TDS = ₹15,000
Net Tax Payable = ₹1,72,500
Advance Tax Installments:
-
By 15 June: ₹25,875 (15%)
-
By 15 Sep: ₹51,750 (30%)
-
By 15 Dec: ₹51,750 (30%)
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By 15 Mar: ₹43,125 (25%)
💰 Penalty for Late Payment of Advance Tax
| Section | Penalty/Interest |
|---|---|
| 234B | 1% per month if 90% of total tax not paid |
| 234C | Interest for deferment of installments |
⚠️ Even a delay of 1 day can attract interest.
🏦 How to Pay Advance Tax Online?
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Visit: https://www.incometax.gov.in
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Go to ‘e-Pay Tax’
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Select Form 280
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Choose 'Advance Tax'
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Pay via net banking, UPI, credit/debit cards, or RTGS/NEFT
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Save the challan for future reference
📌 Tips for Taxpayers
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Keep track of additional income (like FD interest, capital gains)
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Use an income tax calculator or consult a tax advisor
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Set calendar reminders for installment deadlines
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Don’t forget to reconcile TDS with Form 26AS
🧾 How Verotus Finlegal Solutions LLP Can Help You
At Verotus Finlegal Solutions LLP, we assist:
✔️ Salaried Individuals with additional income
✔️ Freelancers and Consultants
✔️ SMEs and Startups
✔️ NRI Tax Filers
We offer:
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Tax estimation and calculation
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Reminder and due date tracking
-
Complete filing and compliance
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Error-free Form 26AS reconciliation
📞 Contact us today to stay compliant and penalty-free!
🧠 Conclusion
Advance tax is not just a legal obligation—it's a smart financial move. Paying it correctly and on time can help you avoid penalties, reduce end-of-year stress, and manage your finances effectively.
Whether you’re a salaried employee with side income or a full-time business owner, planning your advance tax is a sign of responsible money management.
💡 Confused about advance tax calculations?
Let Verotus Finlegal Solutions LLP simplify it for you.
📞 Call us today or visit www.verotusllp.com
📍 Kolhapur | 📧 verotusllp@gmail.com
