Difference between Advance Tax and Self Assessment Tax

There are different types of tax payments which are given below. In this article, we will be taking a close look at the difference between the Advance Tax and Self Assessment Tax.

It is important to know the purpose of each Advance Tax payment and Self Assessment Tax payment because you have to select a particular type at the time of paying taxes.

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Advance Tax

Advance Tax is part payment of your tax liability before the end of the financial year. It is based on the principle of “pay as you earn”. As per the income tax act, every assessee whose tax liability for a financial year exceeds INR 10,000 is required to pay advance tax on an installment basis. There is an interest penalty in case the Advance tax is not paid before the end of the financial year.

While paying Advance tax through challan 280, you have to select (100) ADVANCE TAX as a type of payment.

Example

Prashant runs a small trading business. His expected annual profits for FY 2016-17 from trading is INR 10,00,000. Accordingly, his approximate tax liability will be INR 1,29,000. Since his total tax liability exceeds INR 10,000, he is required to pay advance tax on an installment basis. Prashant will have to pay advance tax before 31st March 2017 to avoid the interest penalty.

Advance Tax Filing (Quarterly)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]
Advance Tax Filing (Quarterly)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]

Self Assessment Tax

It is what the assessee pays after the end of the financial year. Before filing the income tax return, every assessee is required to calculate the tax liability. If there are any outstanding tax dues to be paid then it is to be paid first before filing Income Tax Return.

While paying Advance tax through challan 280, you have to select (300) self-assessment tax as a type of payment.

Example

Esha is a housewife and she also teaches school kids in her spare time. She earned approximately INR 3,50,000 In FY 2016-17 from tutoring. While filing her tax return, she calculated her tax liability at INR 5000. Esha has to pay this self-assessment tax of INR 5000 before filing her tax return.

Advance Tax Filing (Annual)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]
Advance Tax Filing (Annual)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]

FAQs

What if I don’t pay a self-assessment tax?

If you don’t pay self-assessment tax, you will not be able to file your Income Tax Return. Once you pay your self-assessment tax, you also need to provide counterfoil information in your return.

How to pay self-assessment tax?

There are two ways to pay self-assessment tax:
– Deposit in a bank with self-assessment tax challan or
– Online payment using Net banking facility

Do salaried people have to pay advance tax?

In the case of salaried individuals, TDS is deducted from their salary and deposited to the government by their employer. So as far as salary income is concerned, they are not required to pay advance tax. However, for all the incomes other than salary, if the total of such incomes exceeds INR 50,000 then they will have to assess the tax liability on the same and pay advance tax.

How do I determine whether I am liable to pay advance tax or not?

Before every due date for payment of advance tax, you will have to calculate your expected annual income and determine the tax liability on the same. If your total tax liability exceeds INR 10,000 then you are liable to pay advance tax as per the schedule has given above.

What if I don’t pay advance tax on time?

As mentioned above, if you fail to pay advance tax or make a late payment of advance tax, you will have to pay penal interest. Under section 234B, interest for default in payment of advance tax is levied at 1% simple interest per month or part of a month

Got Questions? Ask Away!

  1. Hey @Shweta_Saini

    Advance tax is a ‘Pay as you earn’ tax, so it is required to be paid during the financial year in four different instalments in case your Taxable Liability is more than INR 10,000 for the financial year which stands true for you.

    The due dates for advance tax installments are:

    • 15th June - 15% of the tax liability
    • 15th Sept - 45% of the tax liability
    • 15th Dec - 75% of the tax liability
    • 15th March - 100% of the tax liability

    If you are eligible to pay advanced tax but have not paid advance tax, the penalty will be applicable u/s 234B and 234C.

    Let us know if you have any further questions!

  2. Hi Team, I had assumed that I will be able to pay advanced tax before March because I thought I could go for presumptive tax filing. But now it looks like I cannot opt for a presumptive taxation scheme. So does it mean that I did not pay the advanced quarterly tax that I was supposed to pay?

    If yes, what is the penalty in every case or are there some exceptions to avoid this interest penalty?

    Thanks in advance!

  3. Hey @riya_gupta

    You will be charged an interest penalty under section 234C for the delay/non-payment of advance tax during the year @1% per month on the shortfall amount. Additionally, under Section 234B a penalty interest is imposed on the taxpayers in case the advance tax payment is less than 90% of assessed tax liability during the year.

    You can avoid interest u/s 234B by paying at least 90% of your assessed tax liability by March 15, 2021.

    Hope this helps!

  4. Hey @TeamQuicko

    I have LTCG of more than 7 lakhs from the equity for this year. Is there a way to reduce my tax liability? Also, do I have to pay the tax in advance? If I fail to do so, what will be the penalty/interest percentage I have to pay during my tax filing in 2020?

  5. Hey @ViraajAhuja47, you can set off against non-speculative business loss like F&O for the current year. Long-term capital losses for the previous as well as the current year. Yes, you are required to pay advance tax in case your tax liability is more than INR 10,000 for the FY. The penalties for non-payment of advance tax are:

    Non-payment of Advance Tax u/s 234B 3: Interest at 1% in case the taxpayer fails to pay 90% of the tax liability in the same FY
    Delay in Payment of Advance Tax u/s 234C 1: if there is a delay in tax payment than interest @ 1% is applicable.

  6. Hello @S_P

    Tax paid on or before 31/03/2021 will be considered as advance tax for FY 2020-21. So a trader can determine the profits between 15th March to 31st March and pay the tax on 31st March, there will be no interest levied.

    Hope this helps!

  7. Hi @TEst_Netflix,

    Tax audit is applicable when:

    1. Turnover is above the threshold limit
    2. Profit is >=6% of the turnover

    You can use this tool to determine if tax audit is applicable to you:

    It is always a good practice to file your ITR and report all your financial transactions to avoid notice from the Income Tax Department. Especially after the SEBI and CBDT’s data partnership. If your total income is below the basic exemption limit, you won’t have any tax liability.

  8. Do I have to pay Advance Tax if the TDS for the year is sufficient to cover tax liabliltiy?

    Does Dividend on equity shares attract separate Advance Tax or is it just another source of income?

  9. Hi @vivek25,

    You are liable to pay advance tax if your total outstanding tax liability for the financial year after TDS is above INR 10,000.

    To calculate your advance tax liability you need to add your estimated income for the financial year from all sources including - Salary, House Property, Capital Gains, Business & Profession and other sources.
    Next, subtract all eligible deductions, expenses, and Tax Credit available to you.
    Now, if your outstanding tax liability is above INR 10,000, you need to pay advance tax to avoid penalty u/s 234B and 234C.

    Hope this answers your query

    You can also use the advance tax calculator to know your advance tax liability under the old and new tax regime

  10. Hi
    When I pay the advance tax through the ZERODHA-QUICKO platform, does it get saved/stored? For example I have paid for Q1. so when I have to pay for Q2, will this be automatically calculated?
    Thanks

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