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Advance tax payments are a critical obligation for taxpayers with a total tax liability exceeding ₹10,000 in a financial year. While salaried individuals typically rely on their employers to deduct Tax Deducted at Source (TDS), it’s important to note that if TDS is not accurately calculated, employees may still face penalties under Sections 234C and 234B. This situation can arise even if TDS appears to be deducted appropriately by their employer.
Key Information: Due Dates for Advance Tax
For the financial year 2024-25, the deadline for the final quarterly installment of advance tax is March 15, 2025. The Income Tax Act of 1961 outlines the following advance tax due dates and required payment percentages:
| Due Date | Advance Tax Payment Percentage |
|---|---|
| On or before June 15 (Q1) | 15% of the net estimated tax liability |
| On or before September 15 (Q2) | 45% of the net estimated tax liability minus any advance tax already paid |
| On or before December 15 (Q3) | 75% of the net estimated tax liability minus any advance tax already paid |
| On or before March 15 (Q4) | 100% of the net estimated tax liability minus any advance tax already paid |
According to Deepa Sheth, Associate Partner at BDO India, timely and accurate payments are crucial to avoid unexpected penalties.
Examples of Tax Obligations
- Capital Gains in November 2024: If you earn income from capital gains in November 2024, you’ll need to settle your total tax liability by the last due dates, December 15, 2024, and March 15, 2025, to evade Section 234C penalties.
- Capital Gains on March 17, 2025: If income is generated on March 17, 2025, you’ll be required to pay the total tax owed by March 31, 2025, since no prior advance tax instalments are applicable for that period.
The Importance of Accurate TDS Deductions
For salaried employees, it is essential that the correct TDS is deducted based on their declared investments and exemptions. If the estimated tax liability doesn’t match the actual liability due to changes in income, employees may find themselves subject to penalties. To mitigate this risk, consider proactively declaring any expected additional income to your employer. This ensures a higher TDS deduction, protecting against eventual tax liabilities.
Chartered Accountant Ashish Karundia emphasizes this practice; should discrepancies arise, employees can reclaim excess tax during the annual tax return filing.
Navigating Job Changes
Things can get tricky when employees switch jobs mid-year. In such cases, it is vital to inform the new employer about previous income, ensuring accurate TDS deductions. Failing to do so may result in inadequate TDS, leaving employees with unanticipated tax liabilities that must be settled through advance tax payments.
As Chartered Accountant Prakash Hegde points out, even if employees pay these liabilities through advance tax, they may still incur penalties under Section 234C without proper communication of previous income.
Example of a Job Change:
Mr. X transitions to a new job in December 2024, having earned ₹8 lakh at his previous employer from April through November. After accounting for deductions, his taxable income stands at ₹6.5 lakh. If he earns an additional ₹4 lakh in his new role, he must report his total earnings to avoid facing tax penalties.
Hegde advises that timely declaration of past income can alleviate undue tax burdens. Employees can use Form 12B or a settlement statement to share this information, yet many often hesitate, leading to complications and penalties.
In summary, understanding and managing advance tax payments is vital for salaried employees, particularly when income situations change. Proper communication with employers and timely tax payments are the best strategies to avoid penalties.
Read More: India’s New Income Tax Bill 2025: Key Updates, Simplifications & What It Means for You
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