Advance tax: Today is the last day to pay; here's what happens if you miss

Have you recently changed your job? Do you have income other than salary? If yes, then you need to pay advance tax. This is because every taxpayer who has the tax liability exceeding Rs 10,000 has to pay advance tax.

For the salaried person, the tax is deducted at source by the employer and is paid to government on behalf of the employee. It is paid in four instalments where 15 per cent is paid by June 15, 45 per cent by September 25, 75 per cent by December 15, and 100 per cent by March 15, of the financial year. However, if you have an additional income like capital gains or you have changed your job then you might need to calculate and pay advance tax.

If there is any shortfall in advance tax in any of the instalment, then one can pay in the next instalment. But in case you have not yet paid the entire advance tax liability for 2021-2022 by March 15, then you have the chance to pay it till March 31, 2022. Post March, 1 per cent interest has to be paid on the due amount. “If advance tax is not paid before March 31 , interest would be levied on default at the rate of 1 per cent per month till the payment is tax or filing of ITR,” said Sujit Bangar, founder, Taxbuddy.com.

It is often seen that when people change jobs or earn capital gains on selling of property or income from trading in shares, they miss out on paying advance tax.

“If we have earned capital gain or business income in given quarter, it’s better to calculate estimated taxable income for that quarter and pay advance tax,” Bangar said.

Advance tax is ‘pay tax as you earn’. Apart from compliance with law, other major benefit of payment of advance tax is cash flow management.

“As we are paying taxes as we earn income, burden of heavy tax outgo at the end of year or at the time of filing won’t come. This apart from saving on interest we can have better cash flow management,” said Bangar.