Decoding the Basics of Advance Tax: Here’s All You Need to Know

Clearing your finances in advance gives a sense of satisfaction and relief and lets us prevent last-minute hassles and stress. If you ascribe to this idea, you would be happy to know that you can also pay your taxes in advance.

Advance Tax
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How? Through the process of advance tax. The major difference in this process is that these taxes are paid in installments on days specified by the Income Tax Department. This is a great option to streamline your finances and is also an ideal choice for those who cannot shell out a sizable amount at the end of each financial year. So, if you want to understand more about what is advance tax, you’ve come to the right place. What follows is a list of 6 questions that will help you decode the basics of advance tax. 

1. What is advance tax?

As is clear by the name, advance tax can be simply defined as the tax you pay in advance. It is also known as the ‘pay as you earn tax’ and can be paid out in installments. This alternative is only available to individuals (including self-employed professionals, freelancers, business persons, and corporate assesses) who have a source of income besides their regular salary. For example, if you earned an income through capital gains, rent, or other such sources, you are eligible to pay advance tax. 

2. How is advance tax calculated

Advance tax is calculated using the following formula

Payable Income tax on total income – Deductions under section 87A = Income tax after relief u/s 87A

+ Surcharge on the estimated income = Tax Liability

+ Education cess


= Total Tax Liability

– Relief other than relief u/s 87A


= Total Payable Advance Tax

3. What is the advance schedule for self-employed individuals and business persons?

Date of InstalmentPayable Advance Tax
On or before 15th September30%
On or before 15th December60%
On or before 15th March100%

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Income Tax Calculation
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4. What is the advance tax schedule for corporate assessments?

Date of instalmentPayable advance tax
On or before 15th June15%
On or before 15th September45%
On or before 15th December75%
On or before 15th March100%

5. How to pay advance tax?

Now that you know what is advance tax and when you need to pay it, let’s discuss how to file income tax returns online for salaried employees. 

  • Step – 1: Estimate the total income of the fiscal year (besides your salary). These income sources could include capital gains, rental income, FD interests, etc. 
  • Step – 2: Enter the yearly income from your salary to get the total taxable earnings. 
  • Step – 3: Calculate the total advance tax payable according to the slab rate applicable to you. 
  • Step – 4: Finally, subtract the TDS from the total tax. You can pay advance tax if the final amount is equal to or more than INR 10,000. 

You can also pay advanced tax by visiting the official website of the following banks – 

  • HDFC Bank
  • AXIS Bank
  • ICICI Bank 
  • State Bank of India 
  • Syndicate Bank   
  • Punjab National Bank (PNB)

6. What are the benefits of paying advance tax?

1. Lets you avoid last-minute stress

One of the biggest advantages of paying advance tax is that it lets you avoid last-minute stress. You don’t have to worry about missing the deadlines or paying a lump sum at the end of the financial year.

2. Allows better financial management

As you now know, advance tax is also known as the pay-as-you-earn tax. This means that you clear your taxes as soon as you earn money rather than waiting till the end of the financial year. This helps you avoid defaulting on payments and allows better financial management. 

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Tax Calculator
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Closing notes

So, here you have it! Here’s everything you need to know about advance tax. In summary, paying advance tax is an excellent way to manage your finances and avoid any last-minute hassles. In addition, it also lets you pay your taxes in installments, making it possible to avoid shelling out a large amount at once. 


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