Earn income from rent, fixed deposits, dividends or freelance work? September 15 could be an important tax deadline for you. Taxpayers with income beyond salary may need to pay the second instalment of advance tax by then, depending on their total tax liability after TDS and TCS.
Taxpayers whose net tax liability after adjusting TDS, TCS and other eligible credits is Rs 10,000 or more are generally required to pay advance tax. By September 15, they must have paid 45% of their estimated annual tax liability under the regular advance-tax schedule.
Also Read: Paying Rs 50,000 A Year For Insurance? How Much Of It Is Actually Cover And How Much Is Investment?
How Is The Advance Tax Calculated?
Start with your estimated income for the year, including salary, interest, rent, dividends, capital gains and other earnings. Calculate the tax payable under the applicable tax regime, including the 4% health and education cess.
TDS, TCS and any advance tax already paid are then deducted from this amount. The balance is the tax that needs to be considered for advance-tax payments.
What If You Earn Rs 5 Lakh As FD Interest?
Interest from bank fixed deposits is generally added to your taxable income and taxed according to your slab.
For example, if you are already in the 20% tax bracket and earn Rs 5 lakh in FD interest, the additional tax would be Rs 1 lakh. Including the 4% cess, the liability would be about Rs 1.04 lakh.
If no TDS has been deducted, 45% of this amount, about Rs 46,800, would form part of the September advance-tax calculation. However, the actual amount payable can be lower if the bank has already deducted TDS or you have paid advance tax earlier.
What If The Rs 5 Lakh Is Salary?
A Rs 5 lakh salary does not mean you have to pay 45% of it as advance tax.
Employers generally deduct TDS from salary after taking the employee's estimated annual income and applicable tax provisions into account. If salary is your only income and enough TDS has already been deducted, you may have no additional advance tax to pay.
The calculation can change if you also earn interest, rent, dividends, capital gains, freelance income or money from a side business. If the tax left after TDS and TCS is Rs 10,000 or more, advance tax may apply.
What If You Earn Rs 5 Lakh From Stocks?
Capital gains are taxed differently depending on the type of gain and asset.
For eligible listed equity shares and equity-oriented funds, long-term capital gains are taxed at 12.5% on gains above Rs 1.25 lakh, subject to applicable conditions.
So, if your eligible long-term equity gain is Rs 5 lakh and the Rs 1.25 lakh exemption has not been used elsewhere, the taxable gain would be Rs 3.75 lakh. At 12.5%, the tax would be Rs 46,875, or about Rs 48,750 after the 4% cess, before other adjustments.
Eligible short-term equity gains are currently taxed at 20%. A Rs 5 lakh short-term gain could therefore result in tax of about Rs 1.04 lakh after cess, subject to applicable conditions and adjustments.
What If The Stock Profit Happens After September?
Capital gains that arise later in the year can be included in the remaining advance-tax instalments, subject to the applicable rules. So, if you book a large profit after September 15, recalculate your tax liability and pay the required advance tax rather than waiting until you file your return.
Also Read: Rs 50,000 Credit Card Bill: Pay It Now Or Convert It Into EMI?
What Happens If You Miss The September 15 Deadline?
A shortfall in advance tax can result in interest. Under the Income Tax Act, 2025, Section 425 covers interest for deferment of advance tax, corresponding to the earlier Section 234C.
The interest is generally 1% per month. For the September instalment, the applicable period is three months, so a shortfall against the required 45% cumulative payment could attract interest of about 3% on the shortfall.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
