How to Pay Advance Tax Online in India: Step-by-Step Guide
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In India, over 6.77 crore income tax returns were filed for A.Y. 2023-24. A common question for any taxpayer is whether they need to pay any advance tax during the financial year itself. In several cases, tax is deducted at source (‘TDS’) or tax is collected at source (‘TCS’). However, TDS/TCS may be less than the final tax amount that is to be paid. Therefore, it becomes important to understand what the obligation of the taxpayer to pay advance tax is and the consequences of non-payment or inadequate payment.

What is Advance Tax?

Advance tax is a system where the amount of tax is paid in advance and in instalments throughout the financial year, rather than making a single lump-sum payment at the end of the year or at the time of filing of return of income. It is a way for individuals, self-employed professionals, and businesses to pre-pay their estimated income tax liability to the Government. This helps in the smooth collection of revenue for the Government and prevents taxpayers from facing a large tax burden at the end of the year. The Income-tax Act, 1961 (‘the Act’) requires most taxpayers to make an estimation of their total income for the year as well as tax deducted/deductible/collected/collectible for the year and accordingly, pay their taxes in advance on specified due dates in the financial year itself.

Who is liable to pay Advance tax?

Advance tax is applicable in every case where the amount of total tax liability (after considering the TDS and TCS is Rs. 10,000 or more). However, a resident senior citizen (aged 60 years or above) not having any income from business or profession is not liable to pay advance tax.

Due dates to pay Advance tax

The due dates for payment of advance tax are as follows:

Due Date

Advance Tax Installment

By June 15

15% of tax liability

By September 15

45% of tax liability

By December 15

75% of tax liability

By March 15

100% of tax liability


Taxpayers who declare profit and gains as per presumptive taxation scheme are required to pay the entire amount of their advance tax liability in a single instalment on or before March 15 and the quarterly due dates do not apply to them. It is pertinent to note that any tax paid up to March 31 would be treated as advance tax.


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How to calculate Advance tax?

Calculating advance tax involves estimating your total income for the financial year and then computing the tax liability based on the applicable tax rates. Here is a general step-by-step process for calculating advance tax:

  1. Estimate Income: Determine all sources of income you expect to earn during the financial year. This can include salary, business income, rental income, capital gains, interest income etc.
  2. Calculate Total Income: Sum up all your estimated income sources to arrive at your total income for the financial year.
  3. Deduct Allowable Deductions and past losses and arrive at taxable income: Subtract any applicable deductions such as life insurance premium, health insurance premiums, PPF investment etc. You may also be required to set off the past years losses which are eligible for set off. Please note that if you opt for new tax regime, then certain deductions are not allowed. Please make a note of this while computing the Total Income. After deducting allowable deductions from your total income, you will arrive at your taxable income.
  4. Apply Tax Slabs: Calculate the tax on your taxable income based on the applicable income tax slabs and rates for the financial year. The tax slabs and rates can change from year to year. Also note that tax slabs for old and new tax regime are different. Further special income are to be calculated at special tax rates.
  5. Apply Surcharge and Cess: If applicable, apply any surcharge or health and education cess to your calculated tax amount.
  6. Deduct TDS and TCS: If you have any tax deducted at source or tax collected at source, subtract that amount from your calculated tax liability.
  7. Determine Advance Tax Liability: Your advance tax liability will be the difference between your calculated tax liability and any TDS already deducted.
  8. Divide into Installments: If your advance tax liability exceeds Rs. 10,000, divide it into four installments and make the payment as per above mentioned installments at given due dates.
  9. Payment of Advance Tax: Pay the calculated advance tax amount on or before the specified due dates. You can pay it online through the official website of the Income Tax Department or at designated banks.

Also, if there is a change in the tax liability during the year, then you can revise the amount of advance tax in the remaining installments and pay the tax as per revised estimates.

It is important to note that advance tax calculations can be complex, especially if you have multiple sources of income, deductions, and changes in tax laws. It is advisable to consult a tax professional or use online tax calculators provided by the Income Tax Department of India to ensure accurate calculations and compliance with the latest tax regulations.

Benefits of Paying Advance Tax

  • Advance tax payment reduces the chances of taxpayers being penalized by way of interest due to default on tax payments.
  • Helps in managing finances better by paying taxes in installments rather all at once. Taxpayers do not have to bother about last minute tax payments.
  • Advance tax payments provide a continuous flow of income to the Government throughout the year.

What are the consequences of non-payment/short-payment/delay in payment of Advance tax?

Interest: Failure to make advance tax payments appropriately and accurately will result in charging of interest as per section 234B and Section 234C of the Income-tax, Act 1961.

Tax notice from Income-tax Department: Failure to pay advance tax or false estimation of advance tax may lead to receipt of notice from the Income-tax Department and consequently, non-payment of advance tax may lead to levy of interest & penalty.

What are the methods for advance tax payment?

It is mandatory for corporate taxpayers and non-corporate taxpayers to whom tax audit under section 44AB is applicable to pay taxes through the electronic payment mode. Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. by depositing the Challan Reference Number (CRN) at the designated banks.

Steps for Online Payment of Advance Tax

Option A: Without logging in to the income tax portal

Step 1: Go to the e-Filing portalwww.incometax.gov.in’ and under ‘Quick Links’, select ‘e-Pay Tax’

Step 1- Go to the e-Filing portal - Kotak advance tax payment


Step 2:
Fill up PAN details and complete the OTP verification with the mobile number and click on ‘Continue’

Step 2- complete the OTP verification for advance tax payment


Step 3:
After OTP verification, a success message with your PAN and masked name will be displayed. Click on ‘Continue’ to proceed.

Step 3- Click on Continue to proceed to pay advance tax


Step 4:
Click on ‘Proceed’ under the window ‘Income-tax’

Step 4- Click on Proceed under the window Income-tax - Kotak advance tax payment

 

Step 5: Select assessment year and Type of payment (Minor head) as ‘advance tax (200)’ and then click on 'Continue’

Step 5- Select assessment year and Type of payment -Minor head- as advance tax -200-

 

Step 6: Fill in the accurate details of tax payment under the relevant categories and click on ‘Continue’

Step 6- Fill in the accurate details of tax payment - Kotak advance tax payment

 

Step 7: In the Select Payment Mode page, select the payment mode (Net Banking/ Debit Card/ Payment Gateway) from the options given under online payment and click on ‘Continue’.

Kotak offers you a simple and seamless way to make such tax payments in a hassle-free manner. You can use Kotak net banking (if you are a Kotak customer) or the Kotak payment gateway (if you are not) to make your tax payment on time.

Step 7- select the payment mode under online payment - Kotak advance tax payment

 

Step 8: Preview and verify the details and then click on ‘Pay Now’ to make the tax payment or edit the details in case of any error and thereafter verify the details again and click on ‘Pay Now’

Step 8- click on Pay Now to make the tax payment - Kotak advance tax payment

 

Step 9: Tick the checkbox after previewing the terms and conditions and thereafter click on ‘Submit to Bank’ to continue with the payment. Based on the payment mode selected, you shall be redirected to the respective webpage for completing the payment transaction.

Step 9- click on Submit to Bank to continue with the tax payment - Kotak advance tax payment

 

Step 10: Once payment is complete, the Challan Form (CRN) will be generated successfully. Download the Challan Form (CRN) for your records and for completing the return filing process.

Step 10- Download the Challan Form -CRN- to pay advance tax

 

Option B: Post logging in to the income tax portal

Alternatively, you can also make the tax payment by logging in to your income tax portal by following the below given steps –

Step 1: On the home page of the e-filing portal of the Income tax department, click on ‘Login’ and thereafter enter your income tax e-filing login credentials.

Step 1- Visit e-filing portal to pay advance tax

 

Step 2: On the Dashboard, under ‘e-File’ select the option ‘e-Pay Tax’.

Step 2- select the option e-Pay Tax to pay advance tax

 

Step 3: On the ‘e-Pay Tax’ page, click the New Payment option to initiate the online tax payment.

Step 3- click the New Payment option to initiate the advance tax payment

 

Step 4: On the New Payment page, click on ‘Proceed’ under the window ‘Income-tax’.

Step 4- click on Proceed under the window Income-tax - Kotak advance tax payment

 

From here on, please follow Step 5 to Step 10 (as given above in Option A) to complete your tax payment online.

Note: After successful payment, you will receive a confirmation Email and an SMS on the e-Mail ID and Mobile number registered with the e-Filing portal.

Frequently asked questions (FAQ’s)

1. Is advance tax compulsory?

Yes, if the amount of total tax liability after considering the TDS and TCS is Rs. 10,000 or more, then you are liable to pay advance tax except if you are a resident senior citizen (aged 60 years or above) not having any income from business or profession.

2. Can I make advance tax payment at a bank branch?

Yes. If you do not have net banking facility or debit card or credit card, you can pay tax offline by making payment over the bank counter at the authorised banks or via RTGS/NEFT. However, you should know that to make tax payment using any of the modes either online or offline, it is mandatory to generate Challan Reference Number (CRN) on the ‘e-Pay tax’ functionality on the e-filing portal of the Income-tax Department. No manual challans are accepted in case of payment over the bank counter. Further, please note that it is mandatory for corporate taxpayers and non-corporate taxpayers to whom tax audit under section 44AB is applicable to pay taxes through the electronic payment mode.

3. Is a Non-resident liable to pay Advance Tax?

Yes, a Non-resident is also liable for payment of advance tax on the income earned in India as per provisions of the Act.

4. What happens if I miss the deadline for payment of advance tax?

If you miss the deadline for payment of advance tax, you can still make the payment in the subsequent payment instalments or on or before March 31 of the year, if all instalment due dates have already passed. This delayed payment will still be considered as advance tax. However, please note that there will be an additional interest charge imposed as per the relevant tax regulations.

5. What to do if I am unable to see my bank in net banking mode?

Payment can be made through Net banking facility of Authorised Banks only. At present, there are ‘22’ Authorised Banks that collect income tax. Taxpayers having an account in any Bank other than the Authorised Banks, may choose the option of NEFT/RTGS mode or Net Banking under Payment Gateway mode.

You can pay tax using Kotak Mahindra Bank Payment Gateway mode, wherein you can check and select your Bank listed therein to complete the tax payment via net banking facility, or by any other payment mode like debit card or credit card or UPI via the Kotak Payment Gateway.

6. Where can I view my advance tax payment?

After successful payment, if the Challan Receipt is not downloaded, the same is available for download in the ‘Payment History’ tab of the ‘e-Pay Tax’ tab after logging in the e-filing portal. You can also view the tax payment by downloading the Form 26AS or Annual Information Statement (AIS).

7. Do I have to pay advance tax for capital gains?

Yes, you must pay advance tax on Capital gains. However, it is not possible to accurately predict the amount of capital gain in advance. Therefore, if you earn capital gains after the advance tax due date, you may choose to pay the advance tax in the remaining instalments.

8. What will happen if I pay an excess amount of Advance tax?

If your tax liability is less than the amount of Advance tax paid by you, then you can claim the amount of Advance tax paid in your return of income and obtain a refund thereafter from the Income-tax Department.

9. What can a taxpayer do in case he/she makes incorrect tax payment (wrong assessment year/ wrong type of payment)?

In case a taxpayer has made incorrect tax payment for A.Y. 2020-21 onwards, there is a mechanism to rectify this error online on the income-tax portal after logging in on the dashboard under the tab ‘Services’à ‘Challan Correction’. This allows taxpayers to make corrections to their challans related to ‘Assessment year’, ‘Tax Applicable (Major head)’, that is and ‘Type of Payment (Minor head) (i.e. Advance tax, Self-Assessment Tax, tax on Regular assessment), for tax payments of A.Y. 2020-21 onwards.

The correction must be made within ‘7’ days of Challan deposit date. If 7 days have lapsed or if the correction pertains to any year prior to A.Y. 2020-21, the taxpayer must approach his/her jurisdictional assessing officer to correct the challan regarding the error. The jurisdictional assessing officer has the power to make the necessary corrections in the challan. The details of jurisdictional assessing officer can be found on the e-filing website of the income tax department.

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