Every citizen of India is liable to pay tax if his/her income comes under the Income Tax bracket. The government depends mainly on its tax collection to finance its spending throughout the year. This funding is utilized in the development of nation, reforming infrastructure, and the betterment of society, which helps in shaping the economy of the country.

What is advance tax?

As the name suggests, advance tax is the practice of paying taxes in advance rather than paying a lump sum amount at the end of the financial year. Also known as 'pay as you earn' scheme, these taxes are supposed to be paid in the same year the income is received.

As per Income Tax Act, a taxpayer needs to pay advance tax if his/her tax liability is 10,000 or more in a financial year. For instance, if your tax liability for the FY 2019-2020 exceeds 10,000, then you are required to pay advance tax in the same year.

Who needs to pay advance tax?

Advance tax is for those who earn money from sources other than salary. It is applicable for self-employed individuals, professionals, and business men if their income exceeds a certain limit This includes money that comes from shares, interest earned on fixed deposits, rent or income received from house tenants. Senior citizens who are more than 60 years of age are exempt to advance tax.

How to calculate advance tax?

Listed below are the steps that will help you calculate advance tax –

• Make an estimate of the total income earned by you other than your salary.
• Subtract all expenses from your income, including medical insurance premiums, phone costs, travel expenses, etc.
• Now, add other income that you received apart from your salary. This includes interest from FDs, house rent, lottery earnings, etc.
• If the amount of tax calculated is more than 10,000, then you are liable to pay advance tax.

How to pay advance tax?

Just like regular tax payment, advance tax payment is also done using challan. There are many banks that allows you to pay advance tax through challans. You can also pay advance tax online from the comfort of your home. Here's a step-by-step guide that will help you pay advance tax online without any hassles –

• To pay advance tax online, you need to click on the government's official website - http://www.tin-nsdl.com
• Choose the correct challan that is ITNS 280, ITNS 281, ITNS 282 or ITNS 284 as relevant to pay your advance tax.
• Fill in your PAN card details along with other important information such as your address, phone number, e-mail address, bank name, etc.
• Once you have entered all the details, you will be redirected to the net-banking page of the website.
• Now, you will receive all the information regarding your payment. Enter all payment details and pay your advance tax online successfully.

What are the benefits of advance tax?

Here's a list of benefits you get when you pay tax in advance -

• It reduces the burden of paying tax at the last moment.
• It helps in mitigating stress that a taxpayer may undergo while making tax payment at the end of fiscal year.
• It saves people from failing to make their tax payments.
• It helps in raising government funds as the government receives interest on the tax collected.

What's the schedule of advance tax payment?

Here's a schedule of advance tax payment for individual and corporate taxpayers –

As a citizen of India, you must pay your taxes on time. If you fail to do so by a stipulated timeline, then you are subject to pay a certain amount in the form of penalty as per Income Tax Act, 1961. Besides, if you are planning to buy a tax savings plan online, prefer to go with Canara HSBC Life Insurance.