How does one calculate advance tax?

[ontherocks]

If the only extra income is from Savings and Deposit/FD interest, how does one forecast what his/her annual income at the end of March is going to be?
FDs could be broken, savings could change any any time during the financial year. Is advance tax always a guesstimate?
Do people download the interest certificate from the bank's website in each quarter to get an estimate? What do people do?

 

[SonyTom]

It's an estimate. Even if you pay more, you will get refund

 

[bugmenot]

I don't understand why there is a concept of advance tax. Any CA/finance expert may share the rationale behind it.

It's better to pay actual tax after FY end just before ITR filing.

 

[SonyTom]

If we don't pay advance tax, we have to pay fine at the end when we file itr. Many people forget to pay advance tax. So it's more money for govt !!!

 

[hender]

If the only extra income is from Savings and Deposit/FD interest, how does one forecast what his/her annual income at the end of March is going to be?
FDs could be broken, savings could change any any time during the financial year. Is advance tax always a guesstimate?
Do people download the interest certificate from the bank's website in each quarter to get an estimate? What do people do?

If it can help

 

[soccer]

A q

You end up selling some property towards the end of the year

You had no other income for the year. You didn't anticipate the sale of that property, so didn't pay advance tax.

Would a.tax still be applicable in such a scenario and if not paid, would all those interest sections (A/B/C) apply too?

 

[Wealth is my birth right!]

A q

You end up selling some property towards the end of the year

You had no other income for the year. You didn't anticipate the sale of that property, so didn't pay advance tax.

Would a.tax still be applicable in such a scenario and if not paid, would all those interest sections (A/B/C) apply too?

Post March 15th if u sell the advance tax window closes so that u can offset while filing returns
Approach an auditor pls they are well worth in these matters may be charged 😜

 

[ontherocks]

If it can help

This is all there in public domain and is not the point of this thread.
To calculate 15% of total payable tax to be paid by June 15th, the first and foremost thing one has to know is what would his total income be by Mar 31st 2026. If its a fixed amount like rent, its understandable. But for something volatile like savings or deposit, how does one do?

 

[ontherocks]

A q

You end up selling some property towards the end of the year

You had no other income for the year. You didn't anticipate the sale of that property, so didn't pay advance tax.

Would a.tax still be applicable in such a scenario and if not paid, would all those interest sections (A/B/C) apply too?

One pays capital gains tax on property sale, not income tax. AFAIK, there is no advance tax applicable to income from property sale.

 

[hender]

This is all there in public domain and is not the point of this thread.
To calculate 15% of total payable tax to be paid by June 15th, the first and foremost thing one has to know is what would his total income be by Mar 31st 2026. If its a fixed amount like rent, its understandable. But for something volatile like savings or deposit, how does one do?

For your query -
Fixed - If have a clear idea 💡 about income, than it's very easy.
Flexible - if it's flexible/not sure, a tentative estimate work.
(TDS on FD is one such method.)
For your reference, Excel can track and give you estimate interest/income before paying advance tax each quarter.

It was reply to @bugmenot

I don't understand why there is a concept of advance tax. Any CA/finance expert may share the rationale behind it.

It's better to pay actual tax after FY end just before ITR filing.

 

[Virtual King]

I don't understand why there is a concept of advance tax. Any CA/finance expert may share the rationale behind it.

What are the advantages of paying Advance Tax? (source - here and here)

• Avoid Penalties and Interest: Paying Advance Tax ensures that you don’t incur interest or penalties under sections like 234B and 234C for underpayment or late payment of Advance Taxe.
• Smooth Cash Flow Management: Paying in instalments; helps to spread out the tax burden to different quarters of the year. Paying entire amount of tax at one go towards the end of the year, can be financially stressful and burdensome.
• Ease of Budgeting: Advance tax payment allows you to plan and budget for your taxes effectively, without the pressure of a large, one-time payment.
• Improved Creditworthiness: If you are into business, paying Advance Tax regularly reflects credibility and financial discipline, which can help improve your creditworthiness and ensure smooth operations.
• Interest on Refunds: If you end up paying more tax as Advance Tax than what you actually owe, you will be eligible to get Interest on Refund of the Excess Advance Tax deposited.
• Satisfy Tax Compliance: Regular Advance Tax payments keep you compliant with the Tax Laws and lessens the risk of tax evasion charges. By paying advance tax, you can better manage your finances and can buy peace by staying on the right side of the Law.
• Seizing Investment Opportunities. Paying advance tax liberates funds that can be strategically invested throughout the year. Whether it’s in the stock market, real estate, or other ventures, taxpayers can leverage these opportunities to grow their wealth, further optimizing their financial portfolio.

Hope this helps. 🙂

 

[Virtual King]

Is advance tax always a guesstimate?
Do people download the interest certificate from the bank's website in each quarter to get an estimate? What do people do?

How Advance Tax Payment Calculated? (Source here). ​

Below are the steps to compute your advance tax liability:
Step 1: Estimate your total income for the financial year from the various sources including capital gains, rental income, professional income, income from fixed deposits, salary and any other sources.
Step 2: From the gross receipts, reduce various deductions under section 80C, 80D, etc.
Step 3: Compute the tax payable on the basis of the current tax slab rates.
Step 4: Subtract any Tax Deducted at Source (TDS) that has already been deducted or is expected to be deducted based on the TDS rates. If your tax liability after deducting TDS exceeds 10,000, you must pay the advance tax.
Step 5: Tax Payable/refundable. Advance tax is the payment of tax during the financial year in 4 instalments based on the estimated income for the year to avoid lump sum tax payment at the year end. If there is a shortage/excess of tax payment after adjusting advance tax, tax deducted at source & tax collected at source, the assessee would arrive at the tax payable or tax refundable, respectively.
Note. Advance Tax liability will be 15%, 45%, 75%, and 100% of Net Tax Liability for the month of June, September, December, and March respectively.
Hope this helps. 🙂