Don't Get Fined! Your Guide to Advance Tax Payment in India (December 2024 Deadline)

Feeling the heat of taxman? Today, December 15th, 2024, is the day for the third installment of your advance tax in India. Missing this date results in penalties and unwanted interest charges. But don’t be alarmed! This guide is all you need to pay your advance tax without any hassle and trouble with the Income Tax Department.

What is Advance Tax?

Advance tax is also a kind of “pay-as-you-earn” for income tax. It is applied to individuals and businesses when the estimated tax liability exceeds ₹10,000 during the FY. Don’t get mislead by that – it’s not specifically for business owners and corporate entities. Even salaried individuals must pay advance tax if the projected tax liability, accounting for the TDS your employer makes, exceeds ₹10,000 for the FY. But if they have no business or professional income, then they are exempt.

Why Pay Advance Tax?

The advance tax system also ensures that the government can see a steady flow of revenue throughout the year to handle their finances. For this reason, they tend not to have the hassle of year-end tax crunches. For you, the burden of paying tax becomes manageable in smaller installments across the year rather than a lump payment at the end.

Deadlines for the Third Installment

Remember, third advance tax for FY 2024-25 needs to be paid on or before December 15th, 2024. Although in principle, it can be paid on the next working day, December 16th, without penalty, it is always advisable to be a good financial citizen and pay on time.

How to Work Out Your Advance Tax Liability

Calculating your advance tax liability can be quite scary, but don’t worry. Here’s a simplified way to do it: Consider your total income from all sources: This is salary, interest income, capital gains, rental income, and any other taxable income. Deduct income tax deductions and exemptions available to you. Deduct your estimated TDS from your total income tax liability. Compute the installments as follows: 15th June: 15% of your estimated tax liability. 15th September: 45% of your total tax liability minus the first installment. 15th December: 75% of your total tax liability (minus the first two installments). 15th March: 100% of your total tax liability (minus any TDS deducted throughout the year). For salaried people, TDS is deducted by the employer. This may not include other sources of income such as interest from fixed deposits or capital gains. It is important to consider these other incomes when calculating advance tax liability.

What happens if I miss the deadline?

Missing advance tax deadlines will incur penalties and interest charges. An interest rate of 1% per month will be charged until the complete amount is paid for any shortfall or unpaid amount. To avoid additional financial burdens, it is better to pay your advance tax on time.

How to Pay Advance Tax

Paying your advance tax ensures timely tax payments and avoids penalties. With the information in this guide, you’re well on your way to managing your tax obligations effectively. Remember, timely payments benefit both the government and you, as a responsible taxpayer. So, go online, pay your advance tax, and breathe a sigh of relief!

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