March 15 Deadline Nears: Avoid Interest Penalties with Timely Advance Tax Payment

For the financial year 2024-25, the due date for the fourth and final installment of advance tax is 15th March 2025. Taxpayers whose total tax liability exceeds Rs 10,000 in a financial year are required to make advance tax payments

As the financial year 2024-25 progresses, taxpayers must gear up for a crucial deadline—March 15, 2025. This date marks the due date for the fourth and final installment of advance tax. Under Indian tax regulations, individuals and businesses with a total tax liability exceeding Rs 10,000 in a financial year must make advance tax payments. Missing this deadline can lead to interest penalties, making understanding the payment process, calculation methods, and available exemptions imperative.

What is Advance Tax?

Advance tax is a system of periodic tax payments designed to distribute the tax burden throughout the financial year. Instead of paying a lump sum at year-end, taxpayers contribute in installments based on their estimated income. The "pay as you earn" model helps maintain cash flow and prevents last-minute financial strain.

Who Needs to Pay Advance Tax?

Advance tax applies to a broad spectrum of taxpayers, including:

• Salaried individuals, freelancers, and business owners with a tax liability exceeding Rs 10,000 in a financial year.
• Senior citizens (aged 60 and above) are exempt if they do not have business income.
• Businesses and professionals under the presumptive taxation scheme (Section 44AD for businesses and Section 44ADA for professionals) must pay their entire advance tax by March 15. However, payments made by March 31 are still considered valid.

Failure to adhere to these deadlines may result in interest charges under Sections 234B and 234C of the Income Tax Act.

Advance Tax Payment Schedule of FY 2024-25

Advance tax is payable in installments, as follows:

• By June 15: 15% of the total tax liability
• By September 15: 45% of the total tax liability (minus tax already paid)
• By December 15: 75% of the total tax liability (minus tax already paid)
• By March 15: 100% of the total tax liability (minus tax already paid)

Businesses and professionals must settle all tax liability by March 15 under the presumptive taxation scheme.

How to Pay Advance Tax Online?

Paying advance tax has become more accessible through the Income Tax Department’s online portal. Taxpayers can complete the process by:

1. Visiting the Income Tax Department’s e-filing portal.
2. Selecting the ‘e-Pay Tax’ option.
3. Entering PAN details and verifying them via OTP.
4. Choosing Assessment Year 2025-26 and selecting ‘Advance Tax (100)’ as the payment type.
5. Entering tax details, selecting a payment method, and completing the transaction.
6. Saving the BSR code and challan serial number for future reference.

Penalties for Late Payment

Failure to pay advance tax on time results in interest charges under:

• Section 234B: If at least 90% of total tax liability is not paid by March 31, interest at 1% per month is charged.
• Section 234C: If the installments are not paid on time, interest at 1% per month is levied for the delay.

Timely payments can help taxpayers avoid unnecessary penalties and maintain compliance.

Advance Tax Calculation Under Budget 2025

To calculate advance tax, follow these steps:

1. Estimate total income from all sources—salary, business income, rental income, capital gains, and interest earnings.
2. Deduct eligible exemptions under Sections 80C, 80D, and other applicable provisions.
3. Apply income tax slab rates under the chosen tax regime (Old Tax Regime or New Tax Regime under Section 115BAC).
4. Subtract Tax Deducted at Source (TDS) already deducted or expected to be deducted.
5. If the final tax liability exceeds Rs 10,000, advance tax must be paid as per the prescribed schedule.

Refund or Additional Tax Payment

At the end of the financial year, the taxpayer must settle the balance if the total tax liability exceeds advance tax paid. Conversely, if excess advance tax has been paid, a refund can be claimed while filing the income tax return.

Conclusion

Advance tax payments ensure smoother financial management and compliance with tax laws. Taxpayers can avoid penalties, optimize cash flow, and stay stress-free during the tax season by estimating income accurately and adhering to payment deadlines. With the next installment due on March 15, 2025, taxpayers should act promptly to fulfill their obligations and avoid unnecessary interest payments.