Tax season is almost here and you’re probably wondering how to pay advance tax. We understand that the thought of paying more taxes may be overwhelming, but we’re here to ease your worries. In this article, we explain everything you need to know about paying advance tax and what documents you will need to meet this obligation if it applies to you. If you are an employee with a third-party employer or run a business with a registered entity (LLC, Corporation, etc.), you may be subject to pay advance taxes. This article explains what that is and how much you will need to pay as an advance for your upcoming tax audit period. Read on to know more!
What is advance tax payment?
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Advance tax is the amount you will have to pay to the government as a part of your regular income tax liability. When you file your income tax return (ITR) for the previous year, you will have to pay a certain amount depending on your category and income bracket. However, if you are an employee or have a registered business and are subject to the advance tax, you will have to pay the advance tax payment before the end of the financial year, i.e. 31st March. The government has put in place the advance tax payment to ensure that people pay their taxes on time. This is particularly important for salaried employees, who typically get their income on a monthly basis. If an individual’s income is in the higher tax bracket and they also receive other sources of income, they may be required to pay advance tax.
How much is the advance tax you need to pay?
It is important to remember that the advance tax is calculated on the basis of the estimated income and taxes for the coming year. Therefore, the tax liability for the current year will be different from the one for the next year and for the period between them. If you are salaried, your employer will calculate the advance tax amount due on your behalf after taking into account your dependents and deductions. You can also calculate your advance tax amount using this Tax Calculator. The advance tax amount is different for each category and income bracket. However, the amount varies depending on the financial year. If you belong to a high income category, you will have to pay more as an advance tax payment than an individual in a lower bracket.
What are the documents required to pay advance tax?
There are a few documents that you need to submit before paying your advance tax. You will have to provide the details of your income and other deductions to calculate the advance tax amount. You will also have to provide information about your investments and the source of funds that you have used to make those investments. In addition, you will have to give details about any foreign assets and income that you have received. Apart from this, you will also have to submit details regarding your investments and residential property in India. The documents required to pay advance tax vary depending on the category you belong to. Here are a few examples: Employee: You will have to submit Form 16, which is issued by your employer, Form 12B, which is issued by your bank, PAN card, and Form 60 if you have any other source of income, such as interest or rental income. Employer: You will have to submit Form 16A, which is issued by your employee, Form 13A, which is issued by the company and PAN card. Employee, running a business: You will have to submit Form 16, Form 12B, PAN card, and Form 24 for the business.
When should you pay your Advance Tax?
The government has set a deadline of 15th August to pay the advance tax for the financial year 2020/2021. This means that you will have to pay the advance tax amount for the period between April 2020 and March 2021 by August 2019. However, if you have been paying advance tax for more than one year, you will have to pay the entire amount before the due date. If you have been paying advance tax for a single year, the payment can be made anytime during the financial year. With the government having released the ITR Forms, you can calculate your income tax liability and pay the advance tax as soon as possible. If you meet the income criteria, you will have to pay advance tax. However, you can also choose to pay the entire amount in a single installment. In case you are a salaried employee, you will have to pay the advance tax by 15th August and inform your employer about the same.
Can you pay your Advance Tax in a single installment?
Yes, you can pay the entire amount at one go. In case you are salaried and have been paying the advance tax for the last few years, you may be eligible for a concession. You can approach your Income Tax Officer to inquire about this benefit. It is important to note that you will be charged interest if you make a single installment after the due date. However, if you are a self-employed person, you have the option to make a single installment or divide the payment into two installments. It is important to note that the date of payment must be before the due date. You can make a single installment of advance tax using the e-payment portal. You will have to select the option to pay the entire amount at one go.
Conclusion
As we have discussed in this article, advance tax is the amount of income tax that you have to pay before the due date. However, the amount you have to pay will depend on your income bracket, residential status, and any other deductions you can avail while filing your ITR. You will have to submit a few documents before paying the advance tax, and the due date varies depending on the category you belong to. It is important to remember that paying the advance tax will save you from getting penalized for the delayed payment.
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