How to Calculate Advance Tax? Step by Step

How to calculate advance tax:  Advance tax calculation is very simple as every layman can do it without difficulty. In this article, we will discuss how to calculate advance tax in easy steps. First of all, you should know that for every person whose tax liability for any financial year is more than Rs.10,000 then he is liable to pay advance tax. So, we will clarify all your queries related to advance tax calculation like how much advance tax, how to pay advance tax, consequences of failure to pay advance tax etc.

Step 1: Estimate Your Income to Calculate Advance Tax

• Advance tax will be calculated on the estimated income during the year. It is the tax, which is paid by us in advance to the Government. The tax which is paid on actual income is called self-assessment tax. The income should be correctly estimated according to last year’s average.
• If any capital gain or any other income is earned after paying the instalment, then the next instalment should be revised accordingly. And if such income is earned after 15^th March then it should be deposited before 31^st March.
• Resident Senior Citizen not having income under the head of “Income from Profits and Gains from Business or Profession (PGBP)”

Step 2: Advance Tax Rates 

• The advance tax rates are calculated by the income tax slab for that relevant assessment year. Suppose if we assume today’s date to calculate advance tax, i.e. 25th June 2022 (As this date falls in the financial year 2022-23), then we will check the income tax slab for the A.Y. 2023-24.

You can check here the income tax slab to calculate advance tax for the financial year 2022-23 (for income-earning from 1-4-2022 to 31-03-2023)

Step 3: Check Advance Tax Payment Due Dates to Avoid Penal Interest 

Advance Tax Payment Due Dates for (A.Y.2023-24 F.Y. 2022-23): The advance tax has to be paid by the assessee on the following dates specified by the Income Tax act. The delay in the payment of advance tax attracts a penalty. The following table contains advance tax payment due dates for f.y. 2022-23.  Check Interest on Short or Non Payment of Advance Tax

Advance Tax	Instalment	Due Dates
15% of Advance Tax	1st Installment	15th June 2022
45% of Advance Tax	2nd Installment	15th September 2022
75% of Advance Tax	3rd Installment	15th December 2022
100% of Advance Tax	4th Installment	15th March 2023
The taxpayers who have opted for the presumptive taxation scheme under section 44AD & 44ADA Business income can pay 100% of advance tax on or before 15th March.

Step 4: How to calculate Advance Tax?

After calculating the entire tax on the income of the F.Y. 2022-23, split it according to the percentage of instalment. See our article Advance Tax Installment and Due Dates.

For Example:

Mr. X calculate/estimate his total tax liability of 12050/-

So Mr. X is liable to pay advance tax as his tax is more than Rs.10,000/-

Advance Tax is payable in this case is Rs.12050/-, but it is paid in instalments, and instalments will be as follows.

Instalments	Percentage	Tax
1st Installment by 15-06-2022	15% of 12050	1807
2nd Installment by 15-9-2022	30% of 12050	3615
3rd Installment by 15-12-2022	30% of 12050	3615
4th Installment by 15-03-2022	25% of 12050	3012

So in above example, in case of Mr. X re-estimates his income or earned the short-term or long term income then Mr. X should revise the advance tax accordingly.

Mr. x is liable to pay interest u/s 234B and u/s 234C for any short payment of advance tax. Hope you liked our article and understood how to calculate advance tax. However, you can ask your queries by writing your comment in the form given below. We will try to answer within 24 hours.

Step 6: How to Pay Advance Tax Online? 

Payment of Advance Tax Online: It is very simple to pay advance tax online via the official website of the income tax department e.g. https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp

• Visit the official website link – Click here
• After that select Advance Tax Payment Challan No./ITNS 280
• You can now make payment of advance tax online.

Step 7: Calculate Penal Interest on Default of Advance Tax Payment

The advance tax is mandatory for those, whose tax is more than Rs.10,000 (except senior citizens) during the year. So, if the payment is not made or shortly made, then it attracts the penal interest for short payment and non-payment of advance tax.

Sec 23A: Interest on delay in Return Filing 

Interest is payable where taxpayer furnish return either after the due date or does not file the return.

Self Assessment Tax Payable (After deducting TDS/TCS/Advance Tax/MAT Credit/Relief include relief u/s 89)

x

1% per month or part of a month

x

Period (From next day after the due date of Income-tax return till the date of actual return filing)

Sec 234B: Interest for non/short payment of advance tax

• Interest under section 234B is applicable when your tax payable after reducing TDS for the financial year is more than Rs.10,000 and you did not pay advance tax.
• In the case where you paid advance tax, it is less than 90% of the total tax you payable.

Advance Tax short paid

x

1% per month or part of a month

x

Period (From 1st April of assessment year till actual date of payment)

Sec 234C: Interest for deferment of advance tax instalments

Interest u/s 234C is levied, if the advance tax paid in any instalments is less than the required amount. The above table contains the percentage of advance tax instalments required on each date.

Deferred Amount

x

1% per month or part of a month

x

3 months for all instalments except the last instalment. (for the last instalment interest is applicable always for 1 month (e.g. from 16th March to 31st March)

Notes:

• No interest u/s 234C shall be levied if the assessee paid advance tax up to 12% in 1st instalment, and up to 36% in 2nd instalment.
• Advance tax in case of capital gains & winnings: The taxpayer is not able to estimate capital gains and winning or income under the head of “Income from Profits and Gains from Business or Profession (PGBP)”. Upon receiving such income, the taxpayer must pay advance tax in future instalments.