Key Point of Advance Tax

Step 1: Meaning of Advance Tax

In general scheme of taxation a taxpayer is required to pay income tax after the conclusion of the financial year, However, if the total income tax payable is more than 10,000/- in a financial year then the tax is to be paid in advance as per due date.

Step 2: Who is Exempt From Advance Tax

An Individual, HUF or firm whose income is taxed on the presumptive basis under income tax is not required to pay tax in advance, this relaxation is ordinarily available to small business, paying tax as a % of the turnover and not on actual profits.

Step 3: Interest on Late Payment

The advance tax must be paid within due date; the dates are provided hereunder for easy reference. On the late payment of advance tax, the taxpayer is liable for an interest @ 1% per month or part thereof.

Step 4: Who Needs to Pay Advance Tax

Every taxpayer, whether he is a salaried employee, freelancer or having business income in a proprietorship, Firm, OPC, LLP or a company is required to pay income tax on advance basis if the tax is more than 10k during the FY

Step 5: What is Presumptive Taxation

The taxpayer under presumptive taxation has to pay tax on 8% of the turnover. Only individual, HUF and partnership firms qualify for presumptive taxation. In case of trading, the turnover limit is two crore whereas for professionals it is 50 lacs.

Step 6: Interest on Deferment of Advance Tax

The payment of income tax is required to be made on estimated basis during the financial year itself. The legal provisions of payment of the advance tax are mandatory in case the tax payable is more than Rs. 10,000/- in a financial year.