How To Plan Your Advance Tax

By | September 14, 2016

How To Plan Your Advance Tax

We’ve just put the filing of Income Tax behind us and now it is time to plan Advance Tax. Yes, you read that right. 15th June, 2016 was the due date for the first instalment of Advance Tax for the present financial year. But you can still pay your Advance Tax by 15th September, 2016. Wondering how to plan your Advance Tax? We are here to help.

What is Advance Tax?

For those who are still in the dark about this tax, listen in. Advance Tax is a part of Income Tax that an assessee pays in case his tax liability is in excess of Rs. 10,000 per annum. In case you are running a business, the Government says that businesses referred to under Section 44AB of the Income Tax Act are required to pay the entire Advance Tax amount by 15th March of the respective Financial Year.

Tell me more

Advance Tax is payable on your total taxable income. The total tax liability needs to be paid in several instalments on or before the specified payment due dates.

Additional Reading: Investments & Tax Tips For Those In The Highest Tax Bracket

What to consider when paying Advance Tax

When paying Advance Tax, you will need to consider all sources of your income. Yes, all of them. This will probably include salary, professional income, and interest and income from businesses.

Include income from house property when calculating Advance Tax

Additionally, you will have to include any income from a house property. Wait, that does not mean the rent is taxable. The annual value of the house property is taxable, rather than the actual rent received.

What is annual value?

Annual value of a property is considered as the income earning potential of the property, through rent. When you factor in the annual value of the house property, this may be more than the actual rent received by the property owner.

Are there any deductions permitted?

Some deductions can be made from the gross annual value. This makes it possible for an individual tax payer to find out the net annual value. These deductions include municipal tax paid. After deducting the municipal tax paid, some other expenses are permitted as deductions from the annual rent value. These other deductible expenses include ‘repairs and collection charges’, pegged at 30% of the net adjusted rental value. This can be deducted irrespective of whether the expenses have been incurred or not. But remember, if the cost of repairs was borne by the tenants, the owner of the property will not be eligible to claim this deduction.

Check This: You Do NOT Need To Pay Taxes On These Incomes

More deductions

Here’s some good news. Any interest on borrowings is also deductible when calculating Advance Tax. This means you can deduct the interest amount paid on a Home Loan, or money borrowed for the purpose of construction, repairs, or reconstruction of a house.

Let’s talk dates, shall we?

The first instalment i.e. 15% of Advance Tax was due on 15th June, 2016. As per the Income Tax Act, individual tax payers are required to pay up to 45% of Advance Tax before 15th September, 2016 and up to 75% before 15th December, 2016. The total amount of Advance Tax will have to be paid by 15th March of the respective Financial Year i.e. 15th March, 2017.

How and where can you pay?

You can pay Advance Tax electronically through NetBanking from 30 authorised banks, in 13 bank ATMs, and even in an authorised bank through a paper challan. To find out which authorised banks you can visit to make the payment, log on to The Income Tax website will also give you the required challan forms, process your electronic payment, and provide payment status information.

BB Tip: Remember to enter you PAN details correctly to ensure the tax payment is duly credited to your name.

Made a mistake when filing your Income Tax Return? You should read this: How To Correct Errors In Your Income Tax Return

The last word

You need to approximate the tax liability for the previous year, based on the projected incomes that will probably accrue. Remember to include any income that you may be likely to earn from a house property. You must also remember to reduce any tax deducted at source (TDS) on the tax computation.

Now that you have wised up about Advance Tax, go ahead, there’s still time to pay your dues!

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Category: Tax

About Dheeraj Kapoor

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