Those who have total tax liability of over Rs.10,000 on an estimated total income in a financial year (FY) need to pay advance tax. Advance tax is paid in instalments, and the second instalment is due on or before 15 December. However, senior citizens are exempt from paying this tax in certain cases.

WHAT IS ADVANCE TAX?

According to Section 208 of Income tax Act, 1961, every person whose estimated tax liability for the FY exceeds Rs.10,000 has to pay tax in advance. This has to be paid in three instalments on or before the due dates prescribed by the income-tax department. As per income tax rules, 30% of the estimated income tax should be paid by 15 September of the relevant FY up to 60% by 15 December and the rest by 15 March. One may be charged interest penalty under Section 234C of the Act if advance tax is not paid on time. However, you can reduce or increase the amount of advance tax in subsequent instalments if there is a change in your estimated total income and consequently in your tax liability. For instance, while paying the first instalment, you may have estimated your tax liability to be around Rs.25,000 for the financial year, and paid 30% of it, Rs.7,500. But at the time of paying the second instalment, you estimate your tax liability to be only Rs.20,000 for the year. In such a case, you can pay the tax instalment accordingly—Rs.12,000, or 60% of estimated tax. Since you have already paid Rs.7,500 in the first instalment, tax liability in the second instalment would be Rs.4,500.

Remember that while calculating your tax liability, you can take into account taxes deducted at source (TDS) of income. Also, you are allowed to claim refund of taxes while filing your income tax return if you pay more than what is required.

EXEMPTION

According to Section 207 of the Act, a resident senior citizen (an individual of age 60 years or more) who does not have any income from business or profession is not liable to pay advance tax. For instance, a senior citizen may have various sources of income such as rental income, pension, interest from bank deposits, or dividends. She does not have to pay advance tax, as these sources of income do not fall under the income tax head of “income from business or profession”. Such an exemption is irrespective of the amount of income that a senior citizen earns from a source other than business or profession.

WHAT SHOULD YOU DO?

Typically, TDS is charged by employers on an employee’s monthly salary as per the declaration made by the employees related to investments, expenses and other sources of income. Therefore, a salaried individual need not worry if she does not have income other than salary. But if she has, then she should either declare it to her employer and ask for TDS to be applied accordingly or evaluate her tax liability before the advance tax due dates and make the required tax payment. Advance tax can be paid using tax payment challans at bank branches authorised by the income-tax department or online through the Department or the National Securities Depository Ltd.