What Is Advance Tax?
Advance tax is income tax that you pay during the year, in instalments, instead of paying everything at the end. It is also called “pay as you earn”. For salaried people, the employer usually deducts tax from salary (TDS), so little or no advance tax is needed. But if you earn income where tax is not fully deducted, such as business or professional income, rent, capital gains or interest, you may have to pay advance tax yourself.
Who Must Pay Advance Tax?
Advance tax generally applies when your estimated tax liability after TDS/TCS is ₹10,000 or more.
Business Owners & Professionals: Doctors, lawyers and consultants.
Freelancers: Self-employed individuals.
Investors: Those earning capital gains.
Landlords: Individuals earning rental income.
Other Income Earners: Those with taxable interest or additional income.
Companies, Firms & LLPs: Entities with advance tax liability.
Salaried Individuals: Those with additional income not fully covered by TDS.
Exemptions: Resident senior citizens without business or professional income are generally exempt. Presumptive taxpayers may follow special payment schedules.
Advance Tax Calculation: Step by Step
Estimate Income:
Calculate your total annual income.
Apply Deductions:
Include eligible deductions and exemptions.
Calculate Tax:
Apply the relevant tax regime.
Add Cess:
Include applicable surcharge and cess.
Subtract TDS/TCS: Deduct tax already paid.
Deduct tax already paid.
Check Liability:
Advance tax generally applies if the balance is ₹10,000 or more.
Pay Instalments:
Follow the prescribed payment schedule.
Recalculate:
Adjust payments if your income changes.
Documents Required for Advance Tax Calculation
Previous ITR: Last year’s return and tax computation.
Current Income: Sales, rent, interest and other receipts.
Income Estimates: Expected earnings for the remaining year.
Business Records: Accounts and expense details.
TDS Records: Certificates, Form 26AS and AIS.
Capital Gains: Property, shares or mutual fund sale details.
Deductions: Eligible investments and deduction proofs.
Advance Tax Proof: Previous payments and challan receipts.
Upcoming Receipts: Expected large payments or asset sales.
Online Advance Tax Calculation in Bhubaneswar
With online advance tax calculation in Bhubaneswar, you share details by upload, speak to your CA on a call or video and receive a written instalment plan afterwards. It saves time and works for most cases.
Common Advance Tax Mistakes to Avoid
Ignoring Other Income: Include rent, interest and capital gains.
Forgetting TDS: Deduct tax already paid.
Late Payments: Follow the advance tax instalment schedule.
Outdated Estimates: Update calculations as income changes.
Wrong Payment Details: Select the correct assessment year and tax type.
Missing Receipts: Keep all payment challans.
Ignoring Capital Gains: Account for large one-time gains promptly.
Overlooking Interest: Check applicable interest for delayed or short payments.
Underreporting Income: Declare accurate income estimates.
Failing to Recalculate: Review your tax liability throughout the year.
Frequently Asked Questions
What is advance tax?
Income tax paid in instalments during the year, instead of all at once at the end.
Who has to pay advance tax?
Anyone whose tax payable for the year, after TDS and TCS, is ₹10,000 or more. This often includes business owners, professionals, freelancers, people with capital gains or rent and companies.
Do salaried employees pay advance tax?
Usually not, since the employer deducts TDS. But if you have other income that TDS does not cover, you may need to pay.
Do senior citizens pay advance tax?
Resident senior citizens without business income are generally not required to. Your CA checks your case.
How do I pay advance tax?
Online through the income tax portal or authorised banks, using the correct challan. Keep the receipt.