How to Know Tax Liability Has Exceeded for Advance Tax Payment?
To determine whether you need to pay advance tax, you must first estimate your total income for the financial year and calculate your tax liability based on relevant tax rates and deductions.
Follow these steps to determine whether you need to pay advance tax:
(1) Estimate your total income: This includes all sources of income such as salary, business income, rental income, interest income, capital gains, and other taxable income.
(2) Calculate deductions: Identify eligible deductions and exemptions that you can claim, such as expenses, investments, donations, and other applicable deductions as per your country’s tax laws.
(3) Determine applicable tax rates: Check the tax rates that apply to your income level and tax bracket, as these may vary based on your country’s tax laws and income slabs.
(4) Calculate your tax liability: After considering deductions and exemptions, apply the relevant tax rates to your taxable income to estimate your tax liability for the financial year.
(5) Compare with the threshold: Check the advance tax threshold specified by your country’s tax authorities. If your estimated tax liability exceeds this threshold, you must pay advance tax.
It’s crucial to note that tax laws and thresholds vary by country, so it’s best to consult a tax professional or refer to your country’s tax laws and guidelines for accurate and up-to-date information on advance tax and tax liability thresholds.
Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected].