Calculating Your Taxes Made Easy: Advance Tax vs Self-Assessment

In India, advance tax denotes the tax individuals, companies, and businesses pay ahead of time instead of deferring payment until the end of the financial year. Salaried individuals typically have their advance tax obligations managed via TDS by their employers.

However, additional income sources like interest from savings accounts, fixed deposits, rental income, bonds, or capital gains can escalate the tax liability, necessitating prior estimation of one’s tax dues.

Also Read: Which ITR Form To File For AY 2024-25? Income Tax Return Forms Decoded, Check Details Here

Who Pays Advance Tax In India?

If tax amounts to more than Rs 10,000 per year, taxpayers need to pay advance tax in quarterly installments (June, September, December and March).

Self Assessment Tax means the amount that a taxpayer pays on the requisite income after deducting advance tax and Tax Deducted at Source (TDS).

It refers to the additional tax paid by an individual or entity to the government after calculating their total tax liability for a particular financial year. This is usually done when the taxpayer finds that the tax already paid, either through TDS (tax deducted at source) or advance tax, is less than the actual tax liability.

Self-assessment tax is calculated based on the income tax rates and rules applicable for that particular financial year. The taxpayer can pay the self-assessment tax online through the income tax department’s website or by visiting a designated bank branch.

Any tax paid on or before March 31st is treated as advance tax paid during the same FY. The deposit of advance tax is made through challan ITNS 280 by ticking the relevant column, i.e., Advance Tax.

Who Is Liable To Pay Advance Tax?

As per section 208, every person whose estimated tax liability for the year is Rs 10,000 or more, shall pay his tax in advance, in the form of ‘Advance Tax’. In this part, you can gain knowledge on various provisions relating to payment of advance tax by a taxpayer.

How is Advance Tax Calculated And Paid?

Advance tax is calculated as given below:

a) In the case of all assessees (other than the eligible assessees as referred to in sections 44AD and 44ADA of the Income Tax Act):

• At least to 15% On or before June 15
• At least to 45% On or before September 15
• At least to 75% On or before December 15
• 100% On or before March 15

b) In case of eligible assessee as referred to in sections 44AD and 44ADA: 100% On or before March 15.

The presumptive taxation scheme of section 44AD is designed to give relief to small taxpayers engaged in any business (except the business of plying, hiring, or leasing of goods carriages referred to in section 44AE).

The presumptive taxation scheme of section 44AD can be adopted by the following persons :

1) Resident Individual

2) Resident Hindu Undivided Family

3) Resident Partnership Firm (not Limited Liability Partnership Firm)

A person resident in India engaged in the following professions can take advantage of section 44ADA:-

1) Legal

2) Medical

3) Engineering or architectural

4) Accountancy

5) Technical consultancy

6) Interior decoration

7) Any other profession as notified by CBDT

How Is Self-Assessment Tax Calculated And Paid?

Self-Assessment Tax Calculation: After filling out your ITR form with the TDS and advance tax details (if paid), the system computes your income and checks whether tax is still payable. You need to pay it and then fill in the challan details in the return before submitting it.

Who Is Not Liable To Pay Advance Tax?

A resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.