All About Advance Income Tax

Last updated: 21 June 2021

Save Share

Quick Summary

Advance Income Tax, also known as 'pay-as-you-earn' or 'earn tax', is income tax paid in instalments throughout the year rather than as a single lump sum at year-end. This system helps both the government by providing regular funding for development projects and taxpayers by easing the burden of a large payment. It's crucial to adhere to the set due dates to avoid penalties, with interest levied under Sections 234B and 234C for late or insufficient payments.

What is Advance Income Tax?

The amount of income tax that is paid in advance is called the advance tax. This tax is paid in advance rather than a lump-sum payment at the year-end. It is also known as earn tax and is paid in instalments as per the due dates decided by the income tax department.

Purpose of Advance Income Tax

Advance tax can also be called ‘pay-as-you-earn scheme. This tax helps taxpayers in helping the government and also themselves by not finding it hard to pay the whole tax at one go at the end. It helps remove the burden to pay a lump-sum amount at a single time.

Advance Income Tax: Pay As You Earn and Avoid Penalties

Importance of Advance Tax

Paying advance tax can be beneficial in the following ways: Funding the government for development projects from time to time. For taxpayers, it means breaking up tax payment into instalments and avoiding the last-minute arrangement of the full tax amount.

Due Dates to Deposit Advance Tax

The following table shows the due dates to deposit advance tax along with the advance tax payable:

Due Dates	Advance Tax Payable
On or before 15th June	15% of advance tax
On or before 15th September	45% of advance tax less advance tax already paid
On or before 15th December	75% of advance tax less advance tax already paid
On or before 15th March	100% of advance tax less advance tax already paid

However, an assessee who declares profits and gains in accordance with presumptive taxation scheme is required to deposit the whole amount of such advance tax during each financial year on or before the 15th March

Interest on Failure to Deposit Advance Tax

If advance tax paid in any instalment(s) is less than prescribed percentage of instalment amount interest under Section 234C is levied as follows:

Particulars	Rate of Interest	Period of Interest	Amount on which interest is calculated
If Advance Tax paid on or before June 15 is less than 15% of the Amount*	Simple interest @1% per month	3 months	15% of Amount* (-)tax already deposited before June 15
If Advance Tax paid on or before September 15 is less than 45% of the Amount*	Simple interest @1% per month	3 months	45% of Amount* (-) tax already deposited before September 15
If Advance Tax paid on or before December 15 is less than 75% of the Amount*	Simple interest @1% per month	3 months	75% of Amount* (-) tax already deposited before December 15
If Advance Tax paid on or before March 15 is less than 100% of the Amount*	Simple interest @1% per month	-	100% of Amount* (-) tax already deposited before March 15

Interest under Section 234B is levied if the taxpayer has not deposited advance tax or if the advance tax deposited is less than 90% of the total tax liability. The taxpayer will be liable for interest under Section 234B at 1% per month or part of the month from April till the date of payment of tax.

CAclubindia provides a live certification Advance Income Tax Course with a certificate from the Ministry of MSME, Govt. of India.

Details of the Live Advance Income Tax Course

Category: Advance Income Tax Certification Course
Start Date: June 25, 2021
End Date: July 28, 2021
Time: Monday to Friday (07.30 PM to 9 PM)
Duration: 35 hours (Approx 1.5 months) | 20 sessions with 1.5 hours/session +5 hours recorded for Income Tax Returns & their filing
Language: English
Reference: E-notes will be issued a week before the live class

Live Interactive sessions with the experienced faculty- CA Vishal G Poddar will help the participants in getting their queries resolved in real-time. The recorded session will be provided.