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March 8, 2023

Know Even Salaried, Pensioner and Self Employed are liable for Advance Tax payment which is due on 15 March 2023

Know Even Salaried, Pensioner and Self Employed are liable for Advance Tax payment which is due on 15 March 2023

Advance Tax Liability is not just for Corporates/ businesses, it’s also very much applicable for salaried, pensioners, self-employed individuals, freelancers and professionals!!

Even in the case of Salaried / pensioner Advance Tax is the applicable estimated tax liability of more than Rs. 10,000 for a financial year, and the total income tax liability for the year is not expected to be fully covered by Tax Deducted at Source (TDS) in following cases

– The person Change Job and does not disclose previous Income at New Job

– Has salary income without TDS deducted by the employer

– Has income from interest, rent and other source

– Has income from Capital Gains

– Has any other Taxable Income and TDS is not sufficient to cover the overall Tax Liability

Advance tax is applicable for self-employed individuals in India if their estimated tax liability for the financial year is more than Rs. 10,000. Self-employed individuals, such as freelancers, professionals, and businessmen, often have income from sources other than salary, such as business income, consultancy fees, or freelance payments, which are not subject to TDS (Tax Deducted at Source). As a result, they are required to pay advance tax in order to fulfill their tax liability for the year.

Self-employed individuals are required to estimate their total income for the year and calculate the tax liability on it. If the estimated tax liability is more than Rs. 10,000, then they are required to pay advance tax in installments during the financial year. The due dates for payment of advance tax for self-employed individuals are June 15th, September 15th, December 15th, and March 15th.

It is important for self-employed individuals to accurately estimate their tax liability and pay advance tax on time to avoid interest and penalties as per the Income Tax Act.

Presumptive income for businesses–The taxpayers who have opted for the presumptive taxation scheme under section 44AD have to pay the whole amount of their advance tax in one instalment on or before 15 March. They also have the option to pay all of their tax dues by 31 March.

Presumptive income for professionals– Independent professionals such as doctors, lawyers, architects, etc. come under the presumptive scheme under section 44ADA. They have to pay the whole of their advance tax liability in one instalment on or before 15 March. They can also pay the entire amount by 31 March.

if a taxpayer fails to pay their income tax on or before the due date, they may be liable to pay interest under Section 220(2) of the Income Tax Act. The interest is calculated from the due date of payment until the actual date of payment, at a rate of 1% per month or part of the month for the period of delay.

The interest is calculated on the amount of tax that remains unpaid, including any advance tax, self-assessment tax, or regular tax that has been assessed but not paid by the due date. The interest is calculated separately for each assessment year and is calculated on a simple interest basis.

It is important for taxpayers to pay their advance income tax on time to avoid interest charges and penalties under the Income Tax Act.

Taxpayers can consult a tax professional to estimate their tax liability and plan their tax payments accordingly to avoid any interest charges and penalties

Penny Wise Pound Foolish Taxpayers – Many times advance tax is skipped by taxpayers and they land up paying huge interest while filing Income Tax Returns, which could be saved by hiring a professional to calculate correct tax liability. Just to save professional fees they end up paying 10 times more interest amount !!


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