Advance Tax refers to the income tax that must be paid in advance instead of a lump sum payment at the end of the financial year. In India, it applies to individuals, freelancers, professionals, and businesses whose total tax liability for a year is ₹10,000 or more after adjusting TDS. It is also commonly known as the “pay-as-you-earn” tax system.
Advance Tax is typically paid in four installments—June, September, December, and March—based on the estimated income for the year. Timely payment is important, as missing deadlines can lead to interest penalties under Sections 234B and 234C of the Income Tax Act.
This tax plays a crucial role in managing cash flow for both taxpayers and the government. For small business owners and self-employed professionals, staying compliant with advance tax payments helps avoid last-minute stress during annual filings and reduces the chances of legal notices or scrutiny.
Advance tax is also linked with return filing, as accurate advance tax payments reflect good financial planning and record-keeping. It ensures that your tax obligations are spread out over the year, rather than becoming a financial burden at the end.
To understand how advance tax fits into your overall tax strategy or to get assistance with timely payments, visit FinTax24’s income tax solutions.
In summary, Advance Tax is a mandatory and proactive tax payment system that helps you stay compliant, avoid penalties, and plan your finances better throughout the year.