Pay your Advance Tax before 15th of December

Pay your Advance Tax before 15th of December

As per prevailing income tax rules, advance tax has to be paid in four installments as on or before the due dates prescribed by the tax department. So pay your tax before 15th of December for 3rd installment otherwise, one may be charged interest penalty under section234B and section 234C of the Act on the due taxes.

What is advance tax?

As the name suggest advance tax is the income tax that is paid in advance for the income of a particular financial year instead of lump sum payment at the year-end. The normal expectation is that tax has to be paid only when the income is earned but under the tax provisions the tax payer has to actually estimate the income for the entire year and based on this estimation pay advance tax at specific time intervals in specific installment.

The person liable to pay advance tax: If total tax payable in a financial year is Rs. 10,000 or more, then a taxpayer has to pay advance tax, as all the tax payer are covered by the advance tax scheme  under Income Tax Act. For salaried people, TDS deducted can take care of advance tax payment.  Senior citizen (age of 60 years or more) who is not running a business is exempted to pay advance tax.

How to Compute Advance Tax  Liability ?
Listed below are the steps to calculate advance tax:

  • Determine the Income:Determine the income received other than your salary. It’s important to include any ongoing agreements that might pay out later.
  • Minus the Expenses: Deduct expenses from the income. Expenses related to your work (freelancing) such as rent of the work place, travel expense, internet and phone costs can be deducted.
  • Total the Income:Add up other income that might receive in the form of rent, interest income, etc. Deduct the TDS deducted from salaried income.
  • Total Advance Tax:If the tax due exceeds Rs.10,000 then advance tax has to pay.

Following are key points related to Advance Tax Liability for the F. Y. 2017-18:

Earlier upto A.Y. 2016-17 only companies were required to make payment of advance tax in four installments. After the amendment in section 211(1) of Finance Act 2016 and as per Budget 2016 all assessee except assessee covered u/s 44AD are treated at par for Advance Tax provisions.

Advance tax will be paid in 4 installments:

Due Date

Installment Payable

On or before 15th Jun, 2017

Not less than 15% of advance tax.

On or before 15th Sep, 2017

Not less than 45% of advance tax as reduced by the amount paid in the earlier installment.

On or before 15th Dec, 2017

Not less than 75% of advance tax as reduced by the amount paid in the earlier installments.

On or before 15th Mar, 2018

The whole amount (100%) of advance tax as reduced by the amount paid in the earlier installments.

Assessees covered u/s 44AD of the I.T. Act 1961 have to  pay entire amount only in one installment on or before the 15th March, 2018 of the financial year consequent upon raising of the turnover limit from Rs.1 crore to Rs. 2 crore.

Example: The first part consists of estimating the income for the year and the tax that will have to be paid on this. Thus for example if the tax for the year is estimated at Rs 100,000 after this by 15th of  June 15% of the tax for the year has to be paid and after this by 15th of  September 45% of the tax for the year has to be paid, in December then Rs 75,000 i.e,75% has to be paid by the 15th of the month. It could be that due to higher income the tax payment estimate could go up to Rs 1,10,000 by March so by this time the remaining Rs 35,000 would have to be paid.

Penalty and Interest:

 Penalty is imposed for non-payment of advance tax on the scheduled time mentioned above. This penalty is paid along with the taxes due before income tax return filing.


Section 234B of Income Tax Act (Interest for non-payment of Advance Tax): If 90% of the tax due is not paid by the financial year end, interest @ 1% is charged.


Section 234C of Income Tax Act (Interest for Deferred Payment of Advance Tax): If the tax is not paid as per the schedule given above, interest @ 1% per month is charged.


There is a small concession though: as per the new amendment if an individual even pays 12% and 36% of the total tax payable  by June 15th and Sept 15th, instead of the full 15% and 45% then he would not be liable to pay interest of 1% on the shortfall in advance tax under section 234C.

Why to pay advance tax:
It is important to pay advance tax on due dates as the individual could be open to a situation where they face a large hit in terms of the interest payments on their tax liabilities. Since this can be a large figure so to avoid this problem it is better to pay the advance tax as per the requirement.


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