Everything You Need to Know About Advance Tax
Deepshikha | Jan 26, 2022 |
Everything You Need to Know About Advance Tax
If a citizen’s income falls within the Income Tax category, he or she is required to pay tax. To support its spending throughout the year, the government mostly relies on tax revenue. This money is used for national development, infrastructural reform, and social improvement, all of which assist to shape the country’s economy.
Advance tax, as the name implies, is the practice of paying taxes in advance rather than in one large payment after the fiscal year. These taxes, often known as the ‘pay as you earn’ program, are meant to be paid in the same year as the income is received.
According to the Income Tax Act, if a taxpayer’s tax liability is Rs. 10,000 or more in a fiscal year, he or she must pay advance tax.
Those who earn money from sources other than their income are subject to advance tax. It applies to self-employed people, professionals, and business owners whose income surpasses a particular threshold. This comprises money earned from stocks, bonds, and fixed deposits, as well as rent or income from housing renters. Senior citizens over the age of 60 are free from paying advance tax.
The procedures for calculating advance tax are outlined below:
Advance tax payments, like normal tax payments, are made by challan. Many banks accept advance tax payments in the form of challans. You can also pay your advance tax from the convenience of your own home. Here’s a step-by-step approach to paying advance tax online without any problems:
Here’s a rundown of the advantages of paying your taxes in advance:
If your advance tax payment is less than 90% of your assessed tax, you will be charged a monthly interest rate of 1% under Section 234B of the Income Tax Act. The interest is calculated as 1% interest per month on the delinquent amount until the tax is paid up. If you don’t pay by the second or third date, you’ll be charged the same interest penalty.
If you do not pay your advance tax installment on time, you will be charged a 1% interest rate under Section 234C of the Income Tax Act.
If the Income Tax Department discovers that you have paid more tax than you should have, it will refund the difference at the end of the year. By completing and submitting Form 30, taxpayers can request a refund. They must file the claim within one year of the assessment year’s end.
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