r/IndiaInvestments
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  • Introduction
  • Disclaimers and Disclosures
  • FAQs
    • FAQs
    • Mutual Funds and ETFs
      • What is the best mutual fund app for investments?
      • Why should I invest in Direct Plans instead of Regular Plans?
      • What’s the best mutual fund I can invest in?
      • Which date(s) is/are best for SIP in a month?
      • I’ve to invest in ELSS for 80C tax saving. Which fund(s) should I pick?
      • Should I get a Demat Account to buy units in Mutual Funds?
      • Lumpsum investment vs SIP/DCA
      • Why are Index Funds in India not as cheap as Vanguard's Index Funds and ETFs?
    • Insurance
      • Should I invest in this LIC policy?
      • Opinions on investing in smart wealth plan by bank?
      • Up to what age should I take term cover?
      • Do I need my own health insurance? Employer already has group policy
      • Should I take top-up policy or super top-up?
      • Is it worth paying extra premium for term insurance?
    • Stocks
      • Should I invest in smallcase?
      • What is the best app for buying or trading stocks?
      • Which screener(s) should I use?
      • The Stock Market Has Crashed. Which Stocks Should I Buy?
    • Foreign Investing
      • Why should I invest in the US markets?
      • How should I invest in US equity?
    • Tax
      • I don't have any tax to pay. Do I still have to file ITR?
    • Miscellaneous
      • Where can I park money for a few days, a few months, or a few years?
      • What are chit funds? Should I invest?
      • Is Gold a good investment now? It has gone up ~50% this year
  • How To
    • How To
    • How to transfer shares from one demat account to another
    • How to move from one mutual fund platform to another
    • How to switch a Mutual Fund from Regular to Direct Plan
    • How to file SEBI SCORES complaint?
    • How to Update Nominee Details?
    • How to rematerialize mutual fund from demat form
    • How to Pay Advance Tax
  • STOCKS
    • Introduction to the Stocks Series
    • Can You Beat the Market?
    • Reading an Annual Report
    • Researching a Sector
    • Financial Metrics and Ratios
      • Profitability
    • Using Screeners
    • Due-Diligence Checklist
    • Work in Progress
      • Diving Deeper into Businesses
      • Efficiency
      • Liquidity and Solvency
  • EXCEL
    • Excel for Fun and Profit
    • Reactive UI & Updates
    • Using External Data : Google Finance
    • Using External Data : Working with CSV Format
      • CSV Format
      • Computing LTCG Eligible Equity Units
      • Process for Estimating Tax
    • Quantifying Returns: CAGR and XIRR
      • CAGR: Point-to-Point Annualized Returns
      • A Gentle Introduction to XIRR
      • A Rigorous Introduction to XIRR
  • BONDS
    • Bond Basics
    • Government Securities
    • Corporate Bonds
  • MISCELLANEOUS
    • Miscellaneous
    • US Investing
    • Recommended Reading
  • New to Investing
    • Zero to Investing
      • Getting Started
      • Part Two - Defensive Setup
      • Part Three - Spending Pattern
      • Part Four - How to Invest
    • Investment Philosophy and Strategy
      • Basics of Investment Strategy Plan
      • A simple Financial Planning Roadmap
      • Various types of Risks in Investments
      • Are you a Stock or Bond?
      • Assets and Asset Allocation
      • Critical Mass
      • Asset Rebalancing
      • Lumpsum or SIP/STP
    • Insurance
      • Life
        • Life Insurance: What it is exactly?
        • How to Evaluate Life Insurance Needs
        • ULIP - Unit Linked Insurance Plan
        • Some FAQs on Life Insurance
        • Links to Answers related to Life Insurance
      • Health
      • Others: Disability / Home
      • Child Plan
    • All About Mutual Funds
      • What is a Mutual Fund?
      • Types of Mutual Funds
      • What and Why of Mutual Fund Ratings
      • How to Select a Mutual Fund
      • FAQs for Mutual Funds
      • SIP and Mandates
      • How to Become Crorepati using Mutual Funds
      • Analysis using long term equity and debt funds in India
    • Retirement
      • Primer on Retirement Planning
      • Why You should not Opt for a Readymade Pension Plan
      • Studies of Long Term Portfolios and Retirement Withdrawal Rate Suggestions
      • Do-It-Yourself Retirement Plan
    • Personal Finance
    • Behavioral Biases
    • ELI5 Series
      • Time Value of Money
      • Inflation
      • Life Insurance
      • ELI5 guide to Selecting an Equity Mutual Fund
      • How do I start investing in mutual funds [ELI5 series]
      • Mis-selling of Insurance Products
  • BEGINNER'S GUIDE TO INVESTING
    • Zero To Investing
      • The First Step - Emergency Fund
      • The Final Step - Mutual Funds
  • Contributors Section
    • How Can I Start Contributing?
    • What is a Contributor License Agreement and why are we using it?
      • Contributor License Agreement
    • How to link FAQ via bot in Discord
    • Style Guides
      • General Style Guide
      • FAQ Style Guide
      • How To Style Guide
      • Excel Series Style Guide
      • Stocks Style Guide
  • Discord and Reddit
    • How to Search the Wiki From Discord
    • I'm unable to send messages to stocks-fundamentals channel on Discord. Why?
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On this page
  • Introduction
  • When to pay the Advance Tax
  • Steps for Payment
  • Wrap Up

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  1. How To

How to Pay Advance Tax

Introduction to what advance tax means, and if you owe advance tax, how to pay it to IT department

Introduction

Income tax is commonly deducted at source by the entity (employer, banks etc.) while making a payment to the taxpayer in any form (salary, interest, income from profession etc.).

This is known as TDS (Tax Deducted at Source) and is generally reflected in Form 26AS every financial year/ assessment year.

For example, if an employer has paid ₹1,000,000₹1,000,000₹1,000,000 in salary over the year to an employee, then depending on tax saving investments for the employee, the employee might be liable for, say, ₹80,000₹80,000₹80,000 in taxes.

This entire ₹80,000₹80,000₹80,000 would have ideally been deducted by the employer, as TDS, and deposited to income tax department. In particular, the TDSPC (TDS Processing Cell).

However, the taxpayer might have other sources of income on which no tax has been deducted. Or, adding up the income from multiple sources would probably put them in a different tax bracket with extra tax liability; that neither entities might know about.

Examples include:

  • Capital Gains from sale of stocks or mutual fund units, or selling house / real estate

  • Rental income

  • Freelance/business income

  • Income from bank deposits

In such cases, the responsibility lies on the taxpayer to compute their tax liability in advance and pay it to the government directly; as advance tax.

However, it's also not enough to just pay the total tax owed to the Income Tax department, by end of the financial year.

As it happens, one needs to also pay the right tax based on estimate of gross income for the whole year, before the right dates (advance tax deadlines) in a financial year.

When to pay the Advance Tax

Based on prevailing Indian tax law and IT act, it's generally supposed to be paid on a quarterly basis.

The advance tax must be computed and paid based on the tax slab, to which the taxpayer belongs, if the overall tax liability is greater than ₹10,000 in a financial year.

Due Date
Tax payable

On or before 15th June

On or before 15th September

On or before 15th December

On or before 15th March

Note

  • For freelancers and other non-salaried professionals, 100%100\%100% of tax must be paid on or before 15th March.

  • If advance tax is not paid, interest may be charged on the tax liability under sections 234B and 234C of the Income Tax Act.

  • For senior citizen (more than 75 yr old), if only pension and income from bank interest are only the 2 sources of income, the bank will deduct the TDS and no need to file ITR (Income Tax Return).

Steps for Payment

  • Click on Challan No./ITNS 280 section See image(s) below for guidance, and click to zoom in

  • Select (0021) Income Tax (Other than companies) under Tax Applicable.

  • Select (100) Advance Tax under Type of Payment

  • Select the mode of payment, enter your PAN, assessment year and other details. Assessment Year (AY), is usually one year ahead of Financial Year (FY). For example, if it's advance tax for FY20-21, then that should be selected as AY21-22.

  • Make the payment with Netbanking or Debit card or UPI (as applicable), and keep a copy of the tax receipt /challan, which has details such as

    • BSR Code

    • Tender Date

    • Challan No.

See below for a sample counterfoil after advance tax has been paid.

This will be useful at the time of filing of tax returns where details of advance tax paid should be entered.

However, ideally, if the transaction and payment were successful, you should see your 26AS statement updated in a few days after paying advance tax, reflecting the amount. This would also be auto-filled in your ITR, during return filing.

Wrap Up

One might wonder, if there's any value in paying taxes in advance. Why can't we just pay it during filing returns?

Section 234, in particular section 234B and section 234C, deal with penalties of not paying right taxes at the right time. Rest assured, if you owe the Govt. any taxes, you'd have to pay it.

If you don't do it on time, you'd be paying that with exorbitant interest as penalty for late payment.

If you've any concerns over how to estimate advance taxes, it's prudent to do a tax planning at the beginning of the financial year, and review that once a quarter. If needed, it's of extreme value to employ a tax professional for a fee. Might save you a lot of headache and surprises down the line.

You might want to refer to some online articles or posts about more details on this process, and various corner-cases. Here are a few examples, provided below.

PreviousHow to rematerialize mutual fund from demat formNextIntroduction to the Stocks Series

Last updated 3 years ago

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of liability

of liability, minus tax already paid

of liability, minus tax already paid

of liability, minus tax already paid

Visit the tax information network portal of the income tax department. Link:

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https://www.incometaxindia.gov.in/Pages/tax-services/pay-tax-online.aspx
Clear Tax article on Advance Tax
archive.org link
archive.is link
Clear Tax article on paying advance tax
archive.org link
archive.is link
Challan number to be selected on the income tax portal - Dark mode
Challan number to be selected on the income tax portal - Light mode
Type of Payment - Dark mode
Type of Payment - Light mode
Tax Payer Counterfoil - Dark mode
Tax Payer Counterfoil - Light mode