Advance tax calculation is very simple as every layman can do it without difficulty. First of all, you should know that advance tax is paid in installments as we have discussed in previous article. Secondly, you should know that are you liable to pay advance tax, if yes, then this article is for you if not then you should read the article to know how to calculate advance tax. In this article we will discuss about how to calculate advance tax for individuals, HUFs, partnership firms, companies and others.
Estimate Income to calculate advance tax
Advance tax will be calculated on the estimate income during the year. It is the tax, which paid by us in advance to the Government. The tax which is paid on actual income called self-assessment tax. The income should be correctly estimated according to last year average.
If any capital gain or any other income earned after paying installment, then next installment should be revised accordingly. And if such income earned after 15th March then it should be deposited before 31st March.
Rates of advance Tax to calculate advance tax
The advance tax rates are calculated by the income tax slab for that assessment year. Suppose if we assume today date to calculate advance tax, i.e. 22nd July 2017, then we will check the income tax slab for the A.Y. 2018-19. And we will estimate the income for F.Y. 2017-18.
Penalty on Failure to Pay Advance Tax
The advance tax is mandatory for those, whose tax is more than Rs.10,000 during the year. So, if the payment is not made or shortly made, then it attracts the penal interest for short payment and non-payment of advance tax.
We have also covered the topic of “interest on failure to deposit Advance Tax” in detail.
How to calculate Advance Tax?
After calculating the entire tax on the income of the F.Y. 2017-18, split it according to the percentage of installment. See our article Advance Tax Installment and Due Dates.
Mr. X calculate/estimate his taxable income Rs. 4,84,000/– for F.Y. 2017-18.
Tax on the income is 12050/- (including surcharge and education Cess)
So Mr. X is liable to pay advance tax as his tax is more than Rs.10,000/-
Advance Tax is payable in this case is Rs.12050/-, but it is paid in installment, and installments will be as follows.
|1st Installment by 15-06-2017||15% of 12050||1807|
|2nd Installment by 15-9-2017||30% of 12050||3615|
|3rd Installment by 15-12-2017||30% of 12050||3615|
|4th Installment by 15-03-2018||25% of 12050||3012|
So in above example, in case of Mr. X re-estimates his income or earned the short-term or long term income then Mr. X should revise the advance tax accordingly.
Mr. x is liable to pay interest u/s 234C for any short payment of advance tax. Hope you liked our article and understood that how to calculate advance tax. However, you can ask your queries by writing your comment in the form given below. We will try to answer within 24 hours.