Any person liable to pay income tax in India may discharge the tax liability in either of the following ways or a combination of both:<\/p>\n\n\n\n
A.<\/strong> Deduction by a third party on behalf of the taxpayer<\/em> –<\/p>\n\n\n\n B.<\/strong> Payment by the taxpayer<\/em> –<\/p>\n\n\n\n The above taxes are collectively known as “Prepaid taxes<\/strong>“, except the Self-Assessment Tax<\/strong>, which is paid after the end of the tax year while filing the income tax return.<\/p>\n\n\n\n Advance Tax,<\/strong> as the name suggests, is income tax paid in advance<\/strong> during the tax year in which the income is earned. Normally, income earned during a tax year is reported on the income tax return after the end of that tax year. If any tax remains payable after adjusting the prepaid taxes, it is discharged as Self-Assessment Tax<\/strong>.<\/p>\n\n\n\n If, after reducing the estimated prepaid taxes (TDS\/TCS)<\/strong>, the estimated advance tax liability<\/strong> for the tax year is \u20b910,000 \/-or more<\/strong>, the taxpayer is required to pay the balance tax as Advance Tax<\/strong> during the same tax year. This system is based on the principle of “Pay As You Earn”,<\/strong> ensuring that taxes are paid as income is earned rather than waiting until the end of the tax year.<\/p>\n\n\n\n\n
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