The deadline to file income tax returns for the assessment year 2019-20 has been extended by one month to August 31 from July 31. This doesn't mean you can sit back and relax till the deadline, especially if you are liable to pay advance tax. If you wait until the end of next month, you might have to pay more. Here's why!
As the name suggests, advance tax refers to the payment of a part of your yearly taxes in advance. It is the income tax that is payable if your tax liability is over Rs 10,000 in the assessment year. Advance tax, which is also known as 'pay-as-you-earn' scheme, is applicable for the source of income without appropriate tax deduction.
This advance tax should ideally be paid in four instalments before March 31 of the assessment year, if you estimate your tax liability to be over Rs 10,000 after deducting TDS. In case you fail to pay the full tax amount by March 31, and if the advanced tax paid is less than 90 per cent, then according to section 234B of the Inconme Tax Act, 1961, you have to pay an interest of 1 per cent on the outstanding tax amount from the beginning of the next financial year, April 1, till the date of your payment.
|Due date for advance tax instalments||Amount payable|
|On or before 15th June||15 per cent of the advance tax liability|
|On or before 15th September||45 per cent of the advance tax liability|
|On or before 15th December||75 per cent of the advance tax liability|
|On or before 15th March||100 per cent of the advance tax liability|
So, beware! If you think the deadline has been extended and you have more time to file your returns, then you will find yourself paying more interest.
Do check if you have any advance tax to be paid after the deduction of your TDS by your employer or entities.
If your due tax amount minus TDS is Rs 20,000, then you will have to pay an interest of 1 per cent per month from April 1 until you pay the remaining income tax.
Let's say you did not pay the advance tax till March 31. The interest amount due will be Rs 20,000 x 1/100 = Rs 200 per month.
If you pay the tax in June, three months later, the interest amount for those three months will be Rs 200 x 3 months = Rs 600.
So the total tax payable including three month's interest will be Rs 20,000 + Rs 600 = Rs 20,600.
Hurry up! Don't wait for the deadline, file your tax as early as possible to avoid additional interest.