Advance tax majorly applies to self-employed people like businessmen, professionals, freelancers, etc. Senior citizens who do not run any business are exempt from paying advance tax. Salaried individuals do not have to pay advance taxes since their taxes are already deducted at source when the salary is released. In fact, any kind of assessee whose tax is deducted at source will not have to pay advance tax. For example, a freelancer works for two clients of which one sends him the amount after TDS deduction whereas the other doesn’t. In such cases, advance tax needs to be paid for the second client only as the first one has already deducted tax at source.
Starting with the Financial Year 2016-17, those who opt for the presumptive scheme under the Income Tax Act are required to pay the entire amount of their advance tax on or before 15th of March. A grace period of 15 days, that is, till 31st March is also allowed. Presumptive taxation scheme is offered to small businesses wherein the business income is presumed at 8% of the turnover or gross receipts of the given business year. In case the gross receipts/turnover is received by way of an account payee bank draft or account payee cheque or with the use of electronic clearing system, the business income should be calculated at 6% of the turnover. The amount calculated thereafter becomes the final taxable income for the business and the advance tax should be paid on this amount.