'' Advance Tax '' Liability under Income Tax Act 1961

Advance tax simply means paying tax as and when the money is earned, rather than wait for the end of the fiscal year.

The Income Tax Act,1961 requires taxpayers to shell out advance tax, in every case where the tax liability (after TDS cuts) during a fiscal year is ₹10,000 or more

The liability to make payment of Advance Tax arises -

• at least 15 % of the liability on or before June 15
• 45 % by September 15
• not less than 75 %by December 15 and
• the whole amount of the tax calculated, by March 15 of each financial year 

If the estimate of one’s income changes as the instalments progress, the advance tax payable can be increased or reduced accordingly.

Penalty for Non-Compliance 
 

For taxpayers, payment of advance tax on time is critical given the stiff penalties prescribed for not toeing the line. 

If you fail to meet the advance tax by the specified due dates or pay only partially, a 1 % interest per month will be charged on the shortfall until the next instalment (that is, for three months)

Again, if the total advance tax paid (including TDS) is less than 90 % of the tax liability at the end of the financial year, penal interest is payable. 

Note

From 2016-17 onwards, the instalment dates as well the percentage of advance tax payments will be the same for corporates, individuals and other assessees.

Earlier, the first instalment for individuals was due only by September 15, at 30 per cent of the tax liability estimated. 

Any amount paid up to March 31 will also be accepted as advance tax for that financial year