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The last date for advance tax payment is near. If you miss this deadline, you may have to pay interest on your taxes. Under Section 208 of the Income Tax Act, any person whose estimated tax is Rs 10,000 or more in a financial year is required to pay advance tax. If you are a senior citizen and do not have any income from any business or profession, then you do not need to pay advance tax. The employer (company) deducts TDS from the salary of the employed people. But, salaried people need to understand that they may have to pay advance tax in case of income from interest, dividends and capital gains.
Advance tax rules for self-employed
It is also necessary for self-employed people to pay advance tax. Self-employed refers to people who are engaged or own a business like law, medicine and accountancy. Advance tax is paid in four instalments. It has to be paid by 15 June, 15 September, 15 December and 15 March in the financial year. Estimated Tax 1: 15% payment is required by June 15, 45% payment by September, 75% payment by December and 100% payment by March.
Advance tax is paid in four installments
“Interest on tax is charged only if the advance tax paid till June 15 and September 15 is less than 12 per cent and 36 per cent respectively,” said Jesus Sehgal of AKM Global, a tax and consulting firm. On December 15 and March 15, interest on tax is charged only if the advance tax paid is less than 75 per cent and 100 per cent respectively.
Rules in case of presumptive taxation
Keep in mind that if you are self-employed and have opted for the presumptive taxation scheme, you will have to pay advance tax only once. You will have to make this payment from January to March (fourth quarter). Its last date for you will be 15th March. Presumptive taxation covers small businesses and specialized professionals whose gross receipts or annual turnover is up to Rs 2 crore and Rs 50 lakh respectively. Those covered under this taxation scheme are not required to maintain books of accounts. Small businesses have to pay tax at 8 percent of their annual turnover.
What will happen if tax is not paid?
If you do not pay the advance tax by the deadline or your payment amount is short, a simple interest of 1% will be charged on the tax or shortfall amount until the entire tax is paid. Interest on shortfall amount is charged only if advance tax paid till 15th June is less than 12%, advance tax paid till 15th September is less than 36%, advance tax paid till 15th December is less than 75% And the advance payment is less than 75% by 15th March. Tax is less than 100 percent.
What will happen if payment is not made by 31st March?
If you miss the deadline of March 15, you can make the payment till March 31. In such a situation, you will have to pay only 1 month's interest. Chetan Chandak, director of tax consultancy firm Taxbearable, said any amount paid on or before March 31 will be considered as advance tax for that financial year. If you wait for July 31 to pay advance tax, it will be considered as default in paying advance tax. On this, interest will have to be paid at the rate of 1 percent every month for additional four months.