Income Tax 2023: Tomorrow is the last day to pay advance tax; know how to avoid penalty

When it comes to tax payment you need to pay-as-you-earn, which means that you should not wait till July 31st every year to compute your tax liability but pay as and when it becomes due. The government collects tax in advance in the form of quarterly instalments during the financial year and it is not optional but a mandatory requirement. It is paid in four instalments where 15 per cent is paid by June 15, 45 per cent by September 15, 75 per cent by December 15, and 100 per cent by March 15, of the financial year. 

So, if you are a salaried individual but have other sources of income such as fixed deposits then you need to pay final instalment of advance tax before 15th March 2023. Similarly, if you do not depend on salary but have other sources of income such as capital gains, rent or FDs then you need to pay advance tax on your income. Importantly, senior citizens who are aged 60 years or above and who do not have any income from business, are not required to pay advance tax. Moreover, advance tax is payable where the amount to be paid during a financial year is Rs10,000 or more. 

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What happens if one misses March 15 deadline to pay advance tax? 

If you don't pay advance tax on a due date then later you need to pay along with a penalty. "If a taxpayer does not pay the advance tax or there is a shortfall in payment of the advance tax instalment, the due amount will attract the interest of 3 per cent per quarter for the first 3 quarters and 1 per cent for the final instalment. Further, an individual taxpayer will also be liable to pay an additional interest from April 1, 2023 (after the end of financial year 22-23) at the rate of 1per cent per month on the shortfall of the total advance tax, in case the total advance tax paid by such an individual is less than 90 per cent of the total tax payable,” explained Yeeshu Sehgal, Head of Tax Market, AKM Global, a tax and consulting firm.  

However, in case you have not yet paid the entire advance tax liability for 2022-2023 by March 15, then you have the chance to pay it by March 31, 2023. Post March, 1 per cent interest per month has to be paid on the due amount till the payment or filing of ITR.

Another point to be kept in mind is the correct details regarding the payment challan and the assessment year to be chosen for the online payment. For example, challan number 280 is used to pay advance tax and the Assessment year for FY 2022-23 is 2023-24. Once you pay advance tax it gets reflected in your Form 26AS which you can adjust with the tax liability computed at the time of filing the income-tax return for FY 22-23.