De-jargoned: Advance Tax
Benjamin Franklin said ” in this world nothing can be said to be certain, except death and taxes. In India you need not rely only on the tax deducted at source (TDS) or wait till filing income tax returns to pay your taxes, you can also pay ‘advance tax.’
Advance tax means pay your taxes when you earn, or paying taxes in accordance with income flow, rather than waiting till the financial year gets over. Employers mandatorily deduct TDS on a regular basis for employees. However, deduction of TDS is limited to the income known to the employer, as declared by the employee. A salaried employee must pay advance tax if he/she has other sources of income, and which are not declared to the employer, for instance rental income, interest income, short term capital gain or business income. If the total estimated tax on these additional incomes for the relevant financial year exceeds Rs 10,000 per annum, the employees has to pay advance tax, and they must ensure that it is paid on time.
Condition of ‘not paid’
The due amount attracts penal interest if you do not pay the advance tax on time. You will have to pay 1% simple interest per month on the amount that was due in September till the next deadline, 15 December, if you miss the 15 September deadline of paying the first instalment, along with the 60% of advance tax in December. For instance, if your advance tax liability for FY 14-15 is Rs 1,00,000, and you were supposed to pay Rs 30,000 by 15 September 2014. If you forgot to do so , by 15 September, you have to pay Rs 30,000 plus 1% simple interest on this for three months, apart from the second instalment amount of Rs 30,000, which comes to a total of Rs 60,900.
What should you do??
You should either declare it to your employer and ask them to deduct the TDS, or self assess your liability before the due dates and make the payments if you have income other than salary. You can pay it using tax payment challans at bank branches authorized by the Income TAx department, on the Department’s website, or the National Securities Depository Ltd’s website.