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How to pay advance tax? Here's help
Anil Rego | September 15, 2008 13:52 IST
Often one blissfully waits till July subsequent to the end of the financial year to consolidate ones incomes; however, what goes amiss is that tax payment is a ritual which should be visited through the year and not merely during tax filing.
Any income that has not undergone tax deduction at source is liable for taxes under advance tax. Advance tax normally arises when there is income through capital gains, interest earned, winnings from lotteries, income from house property or income from business.
If the tax payable is Rs 5,000 or more, then it is obligatory to pay advance tax. For an individual with only salary income, there is no cause of worry, since the employer will conduct tax deduction at source.
Advance Tax Dates & Tax Payable
For individual assesses, advance tax is payable in installments, before the below mentioned dates:
Assessment of Tax Payable & Payment
Although it is a herculean task to estimate your income (what is likely to be earned during the year), this will be the starting point. Tax is computed based on this and as per the stipulated schedule one would be required to pay the applicable installments.
Challan 280 needs to be filled while making such payment, one can pay either in cash/cheque/demand draft in any bank (ICICI [Get Quote], SBI [Get Quote], HDFC [Get Quote] etc.). Payment by cash and cheque (drawn on same bank - in some cases) will be done by filling the Tax Challan 280.
Keep in mind that one needs to use the Challan 280 while paying online or offline. Also note that the assessment year is one year following the current financial year. e.g for paying tax relating to FY '08-09; the AY is 09-10.
Non-payment or short payment
Non-payment or short payment of advance tax will attract penal interest of 1%, incase one pays less in the first installment because, according to calculations for the first quarter payment (September 15), one expected less income.
For short payment of advance tax by more than 10 per cent or failure to pay advance tax, interest shall be payable on the amount of shortfall at the rate of 1% (simple interest) for every month.
Any excess payment shall be refundable to the assessee, where the excess is more than 10% of the tax assessed; the Govt. will pay interest at the rate of 0.5% for every month from the AY to date of refund.
Action Plan for Salaried Employees
For income from salary, the employer is obligated to conduct tax deduction at source. The additional income (capital gains, interest income, house property income etc) can be declared with the employer to facilitate additional tax deduction, thereby relieving you of the requirement to go through the advance tax payment procedures every quarter.
With only few days left for the first deadline of advance tax payments, we hope the article provides better clarity in adhering to the same.
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