Advance Tax

Advance Tax is the income tax that individuals, freelancers, and businesses are required to pay in instalments throughout the financial year, rather than paying the entire tax at the end of the year. It operates on the principle of "pay as you earn" and is governed by Sections 207 to 219 of the Income Tax Act, 1961.

Advance tax applies to all taxpayers whose estimated tax liability for the year is ₹10,000 or more after accounting for TDS deductions.

Who Must Pay Advance Tax?

Advance tax is applicable to:

• Salaried individuals with additional income (rent, interest, capital gains, freelance income)
• Freelancers and self-employed professionals whose income is not subject to TDS
• Business owners (proprietorships, partnerships, companies)
• Senior citizens (aged 60 or above) who have business income are required to pay advance tax. Senior citizens with only pension or interest income are exempt.

Advance Tax Due Dates and Instalments

For most taxpayers (non-presumptive income), advance tax is paid in four instalments:

Taxpayers under the Presumptive Taxation Scheme (Section 44AD/44ADA) pay 100% of their advance tax in a single instalment by 15th March.

How Is Advance Tax Calculated?

1. Estimate your total income for the financial year from all sources (business, freelance, salary, rent, capital gains, etc.)
2. Deduct eligible deductions (Section 80C, 80D, HRA, etc.)
3. Calculate the tax liability on the net taxable income at applicable slab rates
4. Subtract TDS already deducted or expected to be deducted
5. The balance is your advance tax liability

If this amount exceeds ₹10,000, you must pay it in instalments as per the schedule above.

Interest for Non-Payment or Short Payment

Failing to pay advance tax, or paying less than required, attracts interest under the Income Tax Act:

Section 234B charges interest at 1% per month if advance tax paid is less than 90% of the assessed tax by 31st March.

Section 234C charges interest at 1% per month for each instalment that is short-paid or missed.

How to Pay Advance Tax

Advance tax is paid online through the Income Tax e-filing portal (www.incometax.gov.in) using Challan 280. Payments can be made via net banking, debit card, or NEFT/RTGS.

Advance Tax and Freelancers

For self-employed individuals and freelancers, advance tax is particularly important because no TDS is deducted on most of their income. Without advance tax, they could face a large tax bill in March along with interest penalties.

Freelancers who opt for the Presumptive Taxation Scheme under Section 44ADA (professionals like doctors, lawyers, architects, and consultants) can declare 50% of gross receipts as taxable income and pay their entire advance tax in one go by 15th March.

Advance Tax vs. Self-Assessment Tax

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