Advance Tax means part payment of one’s tax liability before the end of the fiscal year i.e. 31 March. These payments should be payed in advance to the government on your income throughout the year as you earn this Income.
Applicability– If entire tax liability exceeds Rs 10,000 in a financial year.
Senior citizens, persons who are 60 years older or more and do not run a business, are not liable from paying advance tax.
Tax Deducted Source (TDS)– When a person receives salary, Interest, the person paying will subtract TDS before reimbursing the person. If the TDS deducted is higher than the tax due, then the person may not have to pay advance tax.
In simper sense a salaried employee, need not pay advance tax as employer deducts tax at source (TDS). This tax is applicable when an individual has sources of income other than his salary.
Freelancers- Freelancers almost at all times have advance tax due. This is due to the fact that when freelancers get paid, TDS deducted by the employer paying the freelancer is generally not enough.
Due Dates of payment of Advance Tax (For individuals and corporate taxpayers):
On or before 15th June |
15% of advance tax |
On or before 15th September |
45% of advance tax payable |
On or before 15th December |
75% of advance tax payable |
On or before 15th March |
Up to 100% of advance tax payable |
Filing of AT:
Individuals may pay AT using tax payment challans at bank branches authorised by the Income Tax (I-T) Department. There are 926 branches in India that can accept AT payments. Individuals may also pay it online through the I-T department or the National Securities Depository.
Calculation of Advance Tax:
- Estimate Freelancing Income: Sum up the expected income of the person.
- Subtract Expenses: From this income, reduce your expenses which are directly linked to the freelancing work. For e.g. telephone costs, internet connection, rent of your workplace, depreciation on computers, travel expenses, electricity etc.
- Sum up all other Income: include expected income from other sources such as category like House Property, Interest Income, etc.
- If the remaining Tax Due exceeds Rs 10,000, you are required to reimburse AT as per the due dates mentioned above.
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