Advance Tax Deadline Approaching: Taxpayers have just five days remaining to submit the second installment of advance tax for the financial year 2024-2025. The deadline for this payment is September 15, 2024. Failing to pay advance tax by this date may result in penalties as stipulated under sections 234B and 234C of the Income Tax Act.
Understanding Advance Tax
Advance tax is a method of paying income tax in installments during the financial year in which the income is generated, rather than waiting for the end of the fiscal year. This system helps taxpayers manage their tax liabilities effectively and avoid a lump sum payment at year-end.
Payment Schedule for Advance Tax
Advance tax must be paid in four installments throughout the financial year:
| Installment Due Date | Percentage of Total Tax Liability | Accumulated Percentage |
|---|---|---|
| By June 15 | 15% | 15% |
| By September 15 | 30% (includes previous installment) | 45% |
| By December 15 | 30% (includes previous installments) | 75% |
| By March 15 | 25% (final payment) | 100% |
Who is Required to Pay Advance Tax?
If you find that your tax liability is Rs 10,000 or more after TDS (Tax Deducted at Source) has been accounted for on your income, you are obligated to pay advance tax. This requirement does not only apply to salary income but also extends to various other income sources, including:
- Rental income
- Capital gains
- Interest from fixed deposits
- Lottery winnings
Consequences of Failing to Pay Advance Tax
Not paying advance tax, or making delayed payments, can lead to penalties under sections 234B and 234C. The following outlines potential liabilities:
- Section 234B: If you have not settled at least 90% of your total tax liability by March 31, you could incur interest charges at a rate of 1% per month on the unpaid amount.
- Section 234C: You may also be subject to interest at the same rate for the four installments if they are paid late. This highlights the importance of timely and accurate advance tax payments to avoid incurring extra costs.
Conclusion
Advance tax is a crucial aspect of personal tax management, enabling individuals to spread their tax burden throughout the year and avoid financial strain. By understanding the payment structure and adhering to deadlines, taxpayers can effectively manage their tax responsibilities and avoid additional penalties. Make sure to pay your advance tax on time to enjoy a hassle-free financial year!
