Advance Tax

What is Advance Tax?

Advance tax meaning: It is a tax that you pay as you earn. This tax should be paid in advance during the same financial year, rather than paying the lump sum amount at the end of the year. The condition for paying the advance tax is that if your estimated total of tax liability (after TDS) is INR 10,000 or more in a financial year.

Advance taxes are applied to all taxpayers irrespective of their profession, whether you are a businessman, a salaried employee, or a freelancer. The government provides the advance tax due dates, and the payment has to be dome in installments. The senior citizens aged 60 or older are exempt from advance tax only if they do not run a business.

Eligibility Criteria to Pay Advance Tax

Income tax should be paid by every individual, HUF, body of individuals, local authority, or association of persons, and if the tax liability is more than 10,000 Rs in a financial year, then advance tax should be paid. The eligibility criteria for the payment of advance tax are as follows:

• The taxpayer should be either a salaried employee or a self-employed professional.
• The total tax liability to pay the advance tax is RS 10,000.
• Accumulation of income from the collected lottery proceeds.
• Accumulation of interests on FDs.
• Receipt of rental income that has come from the residential properties.
• Gains realized from capital assets or equity investments.

Benefits of Advance Tax

The benefits of Advance tax are as follows:

• By practicing the advance tax, you can avoid the last-minute hassles or encountering the problem of insufficient funds, which can be seen in the case of a lump sum payment at the end.
• By adopting the advance tax payment method by both individual and corporate taxpayers, the process of tax collection becomes easier and smoother. They can also make the advance tax payment online.
• Advance tax payment makes the whole process very convenient and enhances financial management.