Advance tax second instalment payment due date: Penalty for missing the deadline

What is an Advance Tax?

Advance tax is a proactive approach to fulfilling your income tax obligations, allowing you to pay your income tax in installments throughout the fiscal year rather than facing a hefty lump sum at the end. The first installment i.e. 15 per cent of the total amount should be paid by 15th June. The payment of the second Instalment or 45 per cent of the tax should be made by the 15th of September. The third installment of the 75 per cent of the advance tax should be cleared by 15th December. The remaining amount or 100 per cent of the tax should be paid on or before 15th March.

Who pays an Advance Tax?

Every person whose estimated tax liability for the year is Rs10,000 or more, shall pay his tax in advance.

“However it is to be noted that the ₹10,000 or more limit is arrived after the deduction of all the tax credits of TDS/ TCS/ foreign tax credit/ Section 89 relief etc. from the original estimated tax liability,” said Archit Gupta, Founder and CEO, Clear. 

Citing an example, the Clear CEO explained that if a person’s estimated tax liability of the year is ₹10,00,000 on his income from salary, interest income, dividend income, and TDS on salary is ₹9,00,000 and ₹50,000 is on earning from interest, dividend, etc., then his liability will be ₹50,000. In this case, advance tax needs to be paid by the person.

Penalty if you fail to pay Advance Tax

When a taxpayer fails to pay their income tax prior to the due date, they would be liable to pay interest on the unpaid tax under sections 234B and 243C. “Punctuality matters in taxation; missing the quarterly deadlines can lead to additional costs. As per sections 234B and 234C, a penalty interest of 1% per month or part thereof is applied for default in payment of advance tax,” said Abhishek Soni, CEO and Co-founder Tax2win.

“Interest u/s 234B and 234C and be levied on the default on paying the advance tax,” said Archit Gupta.

How to pay Advance Tax?

“You can opt for paying this tax either through online or offline mode. The process includes splitting your tax obligation into four parts, each of which is due in the final month of a quarter and must be paid by the 15th of that month,” said Amit Gupta, MD, SAG Infotech.

In simple terms, anyone who expects to owe ₹10,000 or more in taxes for the year needs to pay advance tax. However, senior citizens who are 60 years old or older and do not have income from a business or profession are not required to do this, according to the income tax department’s website. Salaried persons who don’t have any income other than salary also need not pay advance tax.

Updated: 15 Sep 2023, 01:28 PM IST