Advance Tax: When to Pay, Payment Due Dates & More (FY 2024-25)

Understanding advance tax is crucial for compliance and effective financial planning.

Advance payment of tax is another form of collection of tax in addition to deduction of tax at source (TDS) or collection of tax at source (TCS), in which the government collects in the form of pre-paid taxes.

Advance tax helps the government maintain a steady flow of revenue throughout the year.

In general, the assessee is required to file return of income on or before the due date of filing and clear tax dues before such filing.

Government has developed various mechanisms in which instead of waiting for the assessment year to collect taxes, the assessee is required to pay taxes during the course of earning income in the previous year itself.

Advance tax in India refers to the income tax that is paid in installments throughout the financial year, rather than in a lump sum at the end of the year.

This advance collection of taxes is also known as the “Pay as you earn” scheme.

As per the provisions, if advance tax is applicable, then the assessee shall pay tax in advance during the financial year in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year.

For example; income earned during the financial year 2024-25 shall be chargeable to tax in the assessment year 2025-26. If advance tax is applicable, then the assessee is required to pay tax in advance, on the taxable income of the financial year 2024-25 during the financial year 2024-25 itself after taking all tax credits into account.

Paying your tax liability in advance is known as “Advance tax”.

In this article we tell you, the due dates of payment, interest for delay in payment of tax in advance and other provisions applicable to advance tax in India.

When advance tax is applicable?

Advance tax is applicable when a taxpayer’s total tax liability exceeds Rs 10,000 for a financial year.

This means, as per our tax laws, if net tax payable for a financial year is more than Rs. 10,000, then the assessee is required to pay advance tax in installments during that financial year itself instead of paying towards the end of the year or while filing Income Tax return.

It is not obligatory to pay taxes in advance where the net tax payable for a financial year is less than 10,000 rupees.

However, as per section 207(2), the provision of advance tax shall not apply to an individual resident in India who is of the age of 60 years or more at any time during the financial year and such senior citizen does not have any income chargeable to tax under the head “profits and gains of business or profession”.

How to calculate advance tax for the financial year 2024-25?

Here are the steps to calculate your advance tax liability for the financial year 2024-25 (assessment year 2025-26);

Step 1: Calculate your estimated income of the current financial year 2024-25

Step 2: Compute income tax liability on your estimated income as calculated in step 1 based on the rate of tax applicable to the financial year 2024-25.

Step-3: On tax calculated at step 2, add surcharge, if applicable.

Step-4: Add health and education cess to the amount derived at step-3

Step-5: Allow relief, if any, under section 89, 90, 90A & 91

Step-6: Deduct MAT credit under section 115JAA, if applicable or AMT credit under section 115JD, if applicable

Step-7: Deduct the TDS and TCS available for the financial year 2024-25.

Step-8: The balance amount left out is the tax payable. If such amount is 10,000 rupees or more, then it will be payable in installments as stated below.

At the beginning of the financial year, you need to estimate your total taxable income for the whole year starting from 1^st April 2024 to 31^st March 2025. If the tax liability for the estimated income is more than Rs 10,000, you need to pay advance tax on or before the due dates.

In case of excess payment, you can claim a refund by filing an income tax return.

Format to calculate advance tax payment liability

Payment Schedule: Due dates for payment of advance tax for FY 2024-25 (AY 2025-26)

Not knowing the advance tax due dates can lead you to heavy interest and penalties. You can avoid interest and penalties by knowing who is liable to pay advance tax and when it should be paid.

Section 210 of the Income Tax Act in India deals with the provisions for advance tax payment.

As per Section 210, taxpayers are required to pay advance tax in installments if their total tax liability exceeds Rs 10,000 for a financial year.

Income will include all items of income including long term and short term capital gains, winning from lotteries, crossword puzzles etc. Calculation of income and advance tax has already been discussed above.

If your estimated net tax liability for a financial year exceeds Rs 10,000, advance tax for that year has to be paid in four installments as mentioned below. It’s applicable to all type of assessee (i.e. companies, individuals, partnership firms, LLPs etc).

However, if you have decided to go for presumptive taxation scheme as per section 44AD or 44ADA, you can pay 100% of such advance tax for the financial year 2024-25 on or before the 31st March 2025.

You need not pay advance tax in the previous three installments as specified in the above table. 100% payment can be done on or before 31st March 2025 for the whole financial year 2024-25 instead of paying in four installments, if you have decided to go for section 44AD or 44ADA.

When taxpayer has opted for presumptive taxation scheme

If the last day for payment of advance tax installments is a day on which banks are not functioning or closed then you can make payments in the next following working day. In such cases, interest leviable for late payment of advance tax will not be charged – circular no 676 dated 14th January 1994.

Above installments due dates and percentage of advance tax is applicable to all types of assessee including individuals, partnership firms, LLPs and corporate.

The person liable to pay advance tax in installments may increase or reduce the amount of advance tax payable in the remaining installment or installments in accordance to the estimated income. The advance tax payable thereon can be adjusted in the remaining installment or installments accordingly.

If the last day of payment of any installment of advance tax is a day on which the receiving bank is closed, the assessee can make the payment on the next following working day. In such cases, interest under section 234B and 234C would not be charged.

Interest and penalty for non payment of advance tax

Not paying advance tax can attract a penalty.

For non-payment or short payment, you will be liable to pay interest under section 234C at the rate of 1% per month (simple interest) if you missed the above-mentioned deadlines for the financial year 2024-25: 15th June 2024, 15th September 2024, 15th December 2024 and 15th March 2025.

Under Section 234C interest is calculated from the due date to the date of payment.

If 90% of total advance tax payable is not paid before the end of the financial year, you will be liable to pay interest at the rate of 1% per month under section 234B of the Income Tax Act 1961 in addition to the above interest amount as calculated under section 234C.

This means, you have either not paid any tax for the year or paid less than 90% of the advance tax due.

In case you have not paid tax until the beginning of the next financial year, interest will be calculated from 1st of April of the new financial year until the total income is determined U/s 143(1) or until when self assessment tax is paid, whichever is earlier.

If any capital gain arises after the due date of installment payment then interest will not be applicable on tax payable on capital gain. However, such tax on capital gain has to be paid in advance in remaining installments as applicable.

If after making payment of one or two installments, you want to increase or decrease the amount of remaining installments of advance tax in accordance with the revised estimates of income then it can be done but interest for short payment of earlier installments are required to be paid.

The interest payable can be rounded off to the nearest hundred.

The interest applicable is simple interest and not compound interest.

Can the income tax officer ask the assessee to pay advance tax?

Yes, the assessing officer has power to issue notice of demand under section 156 requiring the assessee to pay advance tax.

Such order can be passed in writing if the assessing officer is of the opinion that the assessee is liable to pay advance tax. It can be passed at any time during the financial year but not later than the last day of February.

The notice should specify the amount of advance tax and the installment or installments in which such tax is to be paid.

While calculating advance tax, the assessing officer will consider the income of latest and earlier previous years to apply the rate in force during the current financial year.

On receipt of the order or intimation, if he assessee thinks that the tax payable on his current income is less than the amount of tax mentioned in the order or intimation, then the assessee can submit his own estimate of lower income and pay advance tax accordingly.

In such a case, the assessee will have to intimate the assessing officer on or before the due date.

If as per the assessee, estimated current year income is higher than the amount specified by the assessing officer, then the assessee shall pay the whole of such higher tax according to his own estimate on or before the due date.

The assessee shall be liable to pay the interest under section 234B and 234C, if the advance tax is not paid as per the requirements of section 11.

Relaxation in payment of advance tax

It’s practically not possible for the assessee to estimate the current year income. 

Therefore, for few incomes it is provided that if such incomes arise after the due date of any installment, then the entire amount payable as advance tax should be paid in remaining installments which are due.

If no such installment is due, then the advance tax arising out of such income should have been paid by 31st March of the relevant financial year.

If advance tax on these incomes are paid in remaining installments or before 31st march, as the case may be, then no interest on late payment will be leviable.

Here are the incomes for which we have above relaxation;

• Capital gains;
• Winning from lotteries, etc;
• Income under the head “business or profession” in cases where the income accrues and arises under the said head for the first time as the business might have been started after certain due dates of payment of advance tax;
• Dividend income.

The amount paid as advance tax other than penalty and interest, shall be treated as a payment of tax in respect of the income of the previous year. Therefore, while filing return of income, the assessee can take credit for such advance tax paid.

If any assessee has not paid tax in advance on the specified dates, then such person will be deemed to be an assessee in default in respect of such installment or installments. Accordingly, such assessee shall be liable to pay interest and penalty under section 220 and 221.

When advance tax is applicable to a salaried individual?

Salaried individuals are liable to pay tax in advance only when taxes deducted by the employer from salary income is less than the actual tax liability by Rs 10,000 rupees or more.

This type of citation arises only when the salaried individual has some additional income apart from salary which employer has not taken into consideration and/or employee has not disclosed his previous employer’s salary income to the current employer in case of switch in job during the financial year.

In order to avoid penal interest, salary individuals are advised to assess their tax liability if they have worked for more than one employer during the financial year or they have other incomes not disclosed to the employer.

Can advance tax be paid from the account of any other person?

Yes, in this regard, you have to refer to circular number 5/2008, dated July 17,2008.

As per this circular, an assessee can make electronic payment of taxes also from the account of any other person. However, the challan for making such payment must clearly indicate the Permanent Account Number (PAN) of the assessee on whose behalf the payment is made. It is not necessary for the assessee to make payment of taxes from his own account in an authorized bank.

In case advance tax paid by you is more than the actual tax liability for the financial year, you can claim refund by furnishing your income tax return.

Do not get confused between advance tax and self assessment tax.

If advance tax and tax deducted from your income is less than your actual tax liability, then you need to pay tax in the next financial year, paying such tax in the next financial year is called self assessment tax. Any payment of tax made on or before March 31 shall be treated as advance tax paid during the financial year.

You can use an advanced tax calculator prepared by the income tax department to calculate your exact liability. (link)