Advance tax income estimation

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vilas yeole (Querist)
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01 October 2015 how income is estimated while calculating advance tax as we have to pay in 1st quarter so how income is estimated of whole year in 1st quarter itself plz repllyyyyyyyyyy

vilas yeole

vilas yeole (Querist)
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01 November 2015 plz someone replyyyyyyyyyyyyyyy

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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14 July 2024 Estimating income for the purpose of calculating advance tax is a key requirement for taxpayers in India. Here’s how income can be estimated and how advance tax is calculated based on that estimation:

### Estimating Income for Advance Tax Calculation:

1. **Previous Year's Income**:
- One common approach to estimating income for advance tax purposes is to use the income earned in the previous financial year.
- If the current year's income is expected to be similar to the previous year's income, this provides a baseline estimate.

2. **Expected Income for Current Year**:
- Taxpayers can also estimate their income based on expected earnings for the current financial year.
- This estimation can take into account factors such as business projections, expected salary increments, dividends, interest income, rental income, capital gains, and any other sources of income.

3. **Quarterly Estimates**:
- Advance tax payments are made in installments throughout the year. The due dates for these installments are typically:
- 15th June (15% of estimated tax liability)
- 15th September (45% of estimated tax liability)
- 15th December (75% of estimated tax liability)
- 15th March (100% of estimated tax liability)

4. **Adjustments Throughout the Year**:
- Taxpayers may need to adjust their income estimates as the year progresses, especially if there are significant changes in income or deductions.
- Revised estimates should be made before each installment due date to ensure accurate payment of advance tax.

### Steps to Estimate Income for Advance Tax:

- **Compile Income Sources**: List all sources of income expected during the financial year, including salary, business income, capital gains, interest, rental income, etc.

- **Factor in Deductions**: Consider allowable deductions under the Income Tax Act, such as Section 80C deductions, business expenses, depreciation, etc.

- **Review Previous Year's Tax Returns**: Refer to the income details and tax calculations from the previous year's tax return to gauge consistency or changes in income sources.

- **Consult a Tax Advisor**: For complex income structures or uncertain projections, consulting a tax advisor or accountant can provide more accurate estimates and ensure compliance with advance tax requirements.

### Conclusion:

Estimating income for advance tax payments involves forecasting expected earnings and adjusting throughout the year as income scenarios evolve. It's important for taxpayers to monitor income closely, review tax liabilities periodically, and make timely advance tax payments to avoid interest and penalties under the Income Tax Act. If you need precise guidance tailored to your specific income situation, consulting with a tax professional is advisable.

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