Do we need to pay any advance tax for trading income before actually filing ITR?

Hi Team / @Quicko

I am earning profits from the April of this FY and lets says my total taxable income would be around 10L for this FY.
So, Do I need to pay any advance tax at any intervals of this FY or just paying actual tax during the ITR filing in JUN/JUL is enough ?

You need to pay advance tax if your estimated tax liability crosses Rs 10K.
It needs to be paid every quarter of the financial year. The due dates for payment of instalments and percentage of estimated annual tax to be paid are as follows
• 15th June – 15% of estimated annual tax
• 15th September – 45% of estimated annual tax
• 15th December – 75% of estimated annual tax
• 15th March – 100% of estimated annual tax

If advance tax is not paid as per above due dates and overall advance tax paid is less than 90% of the total tax paid, then interest shall be levied under section 234 B and C.

More about advance tax…https://learn.quicko.com/advance-tax

Advance calculator…

2 Likes

Hey @Trading_143,

Advance tax is a ‘Pay as you earn’ tax, so it is required to be paid during the financial year in 4 different installments if your Taxable Liability is more than INR 10,000 for the financial year.
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, penalty will be applicable u/s 234B and 234C.

Say I have a business income source, and TDS is debited from my partner company for every payment (3.75% and 7.5% in two revenue streams respectively).

If i fall under taxation liability more than 10k, still i need to pay advance tax or this TDS is fine and whatever remaining i can pay during filing ITR?

Yes, you need to pay advance tax if your tax liability after TDS and TCS credits exceeds 10k.

How one can calculate advance tax in intraday trading ? where one can not assume earnings.

suppose I make 50L profit in intraday trading in APRIL-JUNE quarter. Do I have to pay 35% tax or just 15% in advance tax ?

Yes, you cannot the predict the profits for entire year. You might have a great profit in April-June Quarter, but you cannot extrapolate the profit to say that you will earn at the same rate until the end of the financial year. It could be more or less,

Best way to pay advance tax payments are by paying tax for that particular time period.
Eg : For Sep 15th - calculate and pay advance tax for what was earned till then and same applies for Dec 15th. For last quarter i.e 15th March close to the year end - you can make all the balance payments as you would have fair idea on how you will end the year.

You can claim refund of excess paid advance tax, if any. Tax refunds are processed quickly these days by the IT department.

If you make 50Lacs profit April to June quarter - you need to pay 15% of tax applicable on 50Lacs profit earned before 15th June.

1 Like

Hi @gowtham4,

You need to pay advance tax if your payable tax liability is above INR 10,000. So in case, your tax liability after deducting TDS is more than that, you need to pay advance tax during the financial year.

Hi @ATDES,

That is a very common question a lot of traders have. In such a case, you can calculate the tax liability based on the earnings until the advance tax installment, and usually by the time the last installment of advance tax is due on 15th March, traders have a better idea of the earnings. If there are excess dues, it can be paid when filing the ITR. On the other hand, if you have paid more in advance tax than your income tax liability, you can claim the refund for the same when filing your ITR. The tax credits for the advance tax paid will be reflected in your Form 26AS.

With Zerodha, we are building Tax dashboard for traders like you, to help you better with your Advance Tax.
Stay tuned :wink:

So if my profit is 50 lakhs till 15 Jun.

I have to assume my earnings will be 50 lakhs for each quarter for next 3 quarter.

Total 2 crores and I have to pay 15 % of 2 crore. Which is 30L.

Or I have to pay only for that period.

I also asked you do I have to pay 15% or 35% if we are only paying for quarterly basis.

This is bit tricky as earnings cannot be predicted.
If you are optimistic - Pay 15% tax applicable on Rs 2 Crore.

If you are conservative and pessimistic
Pay advance tax on current period income i.e 50Lacs.
As per the example - Tax applicable on Rs 50 Lacs is 13,12,500/- ; Pay 15% tax applicable on 50Lacs which is 1,96,875/- (15% on 13,12,500/-) in first quarter;

@Quicko is this right way to calculate advance tax

Hi @ATDES,

Advance Tax should be paid after calculating income for each quarter. So if you have earned profit of INR 50 lacs upto 15th June, you must calculate and pay advance tax as 15% of tax liability. The tax is calculated at slab rates i.e. INR 13,65,000 (13,12,500 + 52,500 Cess). You must pay advance tax at 15% of such tax liability = 1365000 * 15% = INR 2,04,750.

In the next quarter, tax liability should be calculated on actual earnings of 2 quarters and 45% of tax liability should be paid by 15th September.

You can calculate your Advance Tax using the calculator here - Advance Tax Calculator

1 Like

So to have better understanding.
What if in the next (2nd) quarter income is 30 lac …where due date is 15th sept and 45% of tax liability
You said for the first quarter it is 15% of 50 lac in this example …but than for second quarter we have to add 30 lac…so total will be 80 lac and 45% of applicable tax?

Hey @curiousvi

For your better understanding, this is how you calculate advance tax:
Step 1: Estimate your yearly total income
Step 2: Calculate your total tax liability for the year
Step 3: Make quarterly payments as mentioned below

Due date of instalment Advance Tax payable by Individual and Corporate Taxpayers
On or before 15th June 15% of the tax liability
On or before 15th September 45% of the tax liability
On or before 15th December 75% of the tax liability
On or before 15th March 100% of the tax liability

In your case, in the 1st quarter, you expected your yearly income as 200 lakhs, so up to 15th June, you were supposed to pay 15% of tax liability of 200 lakhs. Now, coming to 2nd quarter, your expectation of yearly income changes based on the fact that you earned only 30 lakhs in quarter 2, so up-to 15th September you need to pay 45% of re-estimated yearly total income.

Hope this helps! :slight_smile:

@Quicko
Suppose we have paid extra tax and now waiting refund, then will the IT Dept give refund along with the interest or without interest for that period ?

You will get Interest on refund if your refund is 10% or more of the total tax paid.

Further, if the refund is out of any advance tax paid or tax deducted at source during the financial year, then interest @ the rate of 0.5% p.m. shall be paid starting from the 1st April of the assessment year till the date of grant of the refund.

If the refund is out of any tax, other than advance tax or tax deducted at source, then interest shall be paid from the date of payment of such tax till the date of the grant of the refund.

Hey @Stonecold

Interest on an income tax refund is payable by the income tax department mandatorily if the refund is 10% or more of the tax paid. Section 244A deals with interest on income tax refund and provides for interest at the rate of 0.5% per month or part of the month on the refund amount.

Such interest shall be calculated from April 1st of assessment year till the date of grant of refund if a refund is due to excess advance tax paid or TDS.

Further, if the refund is out of any tax paid, other than advance tax or tax deducted at source, then interest shall be paid from the date of payment of such tax till the date of the grant of the refund.

Hope this helps! :slight_smile:

@Quicko
Can we file ITR on our own for trading income/loss from your website without paying any charges ?

Hey @Stonecold

ITR 1 and ITR 4 are completely on Quicko. You can directly import your trading income on Quicko by logging into your Zerodha Kite account. Here’s a webinar we did with Zerodha, where we walk through the whole process.

Like always, we have special discounts for Zerodha traders😉

You can also redeem your Zerodha referral rewards points for unlocking free DIY ITR filing on Quicko🙂