Why is Advance Tax Even More Important in the New Tax Regime?
The New Tax Regime eliminates many deductions that taxpayers previously relied on to reduce their taxable income. As a result, individuals may underestimate their tax liability and find themselves liable for interest under:
- Section 234B – Interest for non-payment or short payment of advance tax.
- Section 234C – Interest for late payment of advance tax installments.
Additionally, since TDS is not deducted on savings bank interest, taxpayers with significant interest income may not realize they need to pay Advance Tax until it’s too late.
How to Calculate and Pay Advance Tax?
Step 1: Estimate Your Total Taxable Income
Include all sources:
- Salary
- Business or professional income
- Capital gains
- Interest from savings accounts and fixed deposits
- Rental income
- Any other taxable earnings
Step 2: Compute Your Total Tax Liability
- Apply the applicable tax rate based on the chosen regime (Old or New).
- Deduct any TDS already paid by your employer or bank.
- If the remaining tax payable exceeds ₹10,000, you must pay Advance Tax.
Step 3: Pay Advance Tax in Installments
The government has set specific due dates for Advance Tax payments:
| Installment Due Date | Advance Tax Payable |
|---|---|
| June 15 | 15% of total tax liability |
| September 15 | 45% of total tax liability |
| December 15 | 75% of total tax liability |
| March 15 | 100% of total tax liability |
Advance Tax can be paid online through the Income Tax Department’s portal or via authorized banks.
What Happens If You Miss Paying Advance Tax?
If you fail to pay Advance Tax on time, you may face:
- Interest under Section 234B – Charged at 1% per month on the unpaid tax amount.
- Interest under Section 234C – Charged at 1% per month for late installment payments.
- A sudden financial burden at the end of the year when you have to pay the entire tax amount along with penalties.
For businesses and professionals, missing Advance Tax deadlines can also impact cash flow planning and financial forecasting.
Benefits of Paying Advance Tax on Time
- Avoids interest penalties – Timely payments help you save unnecessary costs.
- Reduces year-end financial stress – You don’t have to arrange a large sum at the last moment.
- Ensures compliance – Avoid tax scrutiny and notices from the IT department.
- Improves cash flow management – Particularly for businesses and professionals with fluctuating income.
Final Thoughts
While the New Tax Regime offers lower tax rates, it also eliminates key deductions, making Advance Tax planning more important than ever. If you have income from interest, rent, capital gains, or business, you must carefully assess your tax liability and pay Advance Tax on time to avoid penalties.