{"id":4261,"date":"2013-03-31T01:36:12","date_gmt":"2013-03-30T20:06:12","guid":{"rendered":"http:\/\/www.apnaplan.com\/?p=4261"},"modified":"2013-03-31T01:50:05","modified_gmt":"2013-03-30T20:20:05","slug":"advanced-tax-payment-by-salaried-employees","status":"publish","type":"post","link":"https:\/\/www.apnaplan.com\/advanced-tax-payment-by-salaried-employees\/","title":{"rendered":"Advanced Tax Payment by Salaried Employees"},"content":{"rendered":"

If you have paid attention to newspapers in last few days, there are lots of advertisements from Income Tax Department about paying your advance taxes before March 31, 2013.<\/p>\n

Most Salaried individuals are not aware about advance tax and there is a misconception that Advance taxes needs to be paid by businessmen or self employed professionals. But salaried employees too need to pay advance tax under following conditions:<\/strong><\/p>\n

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  1. If they have any income in addition to salaried income (including interest income from Fixed Deposits\/ Saving Accounts, Capital Gains, etc) and<\/strong><\/li>\n
  2. The difference in actual tax liability on such income and TDS (Tax Deduction at Source) is more than Rs 10,000<\/li>\n<\/ol>\n

    Example:<\/h3>\n

    Lets explain the concept of advance tax by an example.<\/p>\n

    Mr. Ram has annual salary of Rs 15 lakhs and he falls in highest tax bracket of 30%. He also has Rs 10 Lakhs in fixed deposit with a bank which pays him interest of 9% every year.<\/p>\n

    Salary Income =<\/strong>\u00a0Rs 15 lakhs<\/p>\n

    For salary income, the employer deducts TDS and submits the same to the income tax department and hence Ram need not be worried about advance taxes on his salary income.<\/p>\n

    Interest income<\/strong> = Rs 10,00,000 x 9% = Rs 90,000<\/p>\n

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    1. As per rule the banks deducts TDS at 10.3%<\/strong>. So the bank would deduct Rs. 9,270 (Rs 90,000 x 10.3%) as TDS and deposit the same on behalf of Ram to income tax department.<\/li>\n
    2. Since Ram\u2019s income falls in highest tax bracket, his actual tax liability on interest received on Fixed Deposit comes out to be Rs. 27,810<\/strong>. So Ram is liable to pay Rs 18,540 (27,810 \u2013 9,270) more as income tax.<\/li>\n
    3. Since this income tax liability difference is more than Rs 10,000 Ram would need to deposit advance taxes.<\/strong><\/li>\n<\/ol>\n

      Also Read:<\/span> How you loose money in Fixed Deposits?<\/a><\/strong><\/span><\/p>\n

      When is Advance Tax Payable?<\/h3>\n

      For individuals, advance tax is payable in three installments in a financial year.<\/p>\n

      So for FY 2012-13 (AY 2013-14) the advance taxes needs to paid as follows:<\/p>\n

        \n
      1. At least 30% of estimated tax difference by September 15, 2012<\/li>\n
      2. At least 60% of estimated tax difference by December 15, 2012<\/li>\n
      3. 100% of estimated tax difference by March 15, 2013<\/li>\n<\/ol>\n

        Here the Tax difference<\/strong> means the difference between the actual tax liability and the TDS<\/em>.<\/p>\n

        So if we take above example, Mr. Ram had to pay<\/p>\n

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        1. At least Rs. 5,562 (30% of 18,540) as advance taxes by September 15, 2012<\/li>\n
        2. At least Rs. 11,124 (60% of 18,540) as advance taxes by December 15, 2012 [This included previous installment of Rs 5,562]<\/li>\n
        3. And Rs. 18,540 before March 15, 2013<\/li>\n<\/ol>\n

          The advance tax dates have been extended till March 31, 2013 so the last installment can be paid on or before this date.<\/p>\n

          How to pay Advance Tax?<\/h3>\n

          Paying advance tax is simple. You need to go to income tax website and fill the relevant form <\/a>and pay online through your bank account.<\/p>\n

          You can also do it offline by visiting the nearest bank branch which deals with income tax.<\/p>\n

          What if you don\u2019t pay Advance Taxes?<\/h3>\n

          As I mentioned earlier, the awareness about advance taxes in not high among salaried class and hence they might have skipped paying advance taxes.\u00a0In case you have not paid advance taxes, a penal interest of 1% simple interest per month on outstanding tax is charged u\/s 234C and 234B<\/strong>.<\/p>\n

          We take the above example and there are two situations:<\/strong><\/p>\n

          Situation 1:<\/strong> <\/span>Mr. Ram skipped the advance tax payment in September and December and paid on March 31, 2013.<\/p>\n

          The interest he needs to pay is:<\/p>\n