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A Brief on Advance Tax Payment, Liability and its related Rules

A Brief on Advance Tax Payment, Liability and its related Rules

Advance tax and TDS are the direct tax rules framed by the government in order to have regular inflow of funds to carry out regular economic activities. Advance tax implies that income tax must be paid in advance instead of lump sum payment at the end of the year. It is also called as pay as you earn tax. The advance tax payment should be made in instalments according to the due dates prescribed by the Income Tax department.

When does Advance tax liability arise?

Advance tax liability arises at the time when the taxpayers’ estimated tax liability in a financial year is beyond 10000 rupees. The advance tax must be paid in 4 instalments in a year. It means the taxpayer who is liable to pay this tax must pay 15% of the estimated tax liability on or before June 15, 45% on or before September 15, 75% on or before December 15 and 100% on or before March 15.

It may be noted that in case the taxpayer fails to pay the advance tax on the due dates under Section 234C, Interest penalty will be charged at the rate of 1% a month or a part of the month.

Advance Tax Payment: Essential points to know

Here is a list of advance tax rules that a taxpayer must be aware of:

Advance Tax Payment: Essential points to know
  • An individual who earns income from salary doesn’t need to pay advance tax instalments as the employers deduct TDS from the monthly salary payments. In case where the salaried individual earns income from other sources other than the salary and if his tax liability is beyond 10k rupees, then as per the income tax rules, he shall pay advance tax.
  • Sometimes taxpayers think that they don’t require paying advance tax if TDS is deducted from their primary income however, this is not true. The liability of paying the advance tax arises when the difference between the total tax payable and the TDS is more than 10000 rupees, as per the Income Tax Act.

Therefore the taxpayer will need to pay advance tax even if an amount is deducted for TDS purposes, but his annual liability is more than 10000 rupees.

  • Under the Income Tax Act, relief has been provided to senior citizens above the age limit of 60 years from paying advance taxes. However, it may be noted that the relief from paying this tax doesn’t apply to all senior citizens. Those senior citizens who get income from business and profession must pay advance tax. However, those that earn income from any other mode are not required to pay this tax.
  • Advance tax must be paid on income from different sources. Taxpayers tend to overlook estimated tax liability on income earned in the form of interest in savings bank, interest from fixed deposits, income earned from sale of investments such as property/mutual funds etc. As taxpayers fail to account for the tax liability on income from these sources, they fail to pay advance tax, and it results in interest levy due to less payment of advance taxes while filing ITR.
  • Taxpayers must keep in mind to check the assessment year that has been selected at the time of paying the advance tax. For example- In case of FY 2020-21, the assessment year shall be 2021-22, and in case the FY is 2021-22, the assessment year shall be 2022-23.
  • Further, for making payment of advance tax liability, you may choose any of the modes- online or offline. Challan 280 is used to make payment of the advance tax through any of the modes. One can get physical Challan 280 from the authorised bank branch in case of making offline payment.


One can easily check the status of advance tax payment challan by visiting the following link- https://tin.tin.nsdl.com/oltas/index.html Advance tax is the direct tax rule framed by the government in order to have regular inflow of funds to perform regular economic activities.

Read our article:Is it Possible to File ITR for the Previous 3 Years Together?

Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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