Paying advance tax on mutual funds

If you thought Income tax is only paid at the end of the fiscal year, think again. If your annual tax liability exceeds Rs. 10,000, then you are required to pay tax during the financial year in four instalments. The due dates of these instalments are 15th June by which time you have to pay 15% of tax liability for the whole year, 45% by 15th September, 75% by 15th of December and then the entire tax liability by 15th March. The upcoming third instalment deadline of 15th December is approaching. Considering taxpayers have to pay advance tax before the fiscal year ends, it means they need to estimate how much income they will earn during the year.

To calculate the estimated annual income, sum up the predictable sources of income like salary, rent and interest. Calculate the tax on it and pay up 75% of it after subtracting the tax already paid.

However, if you have redeemed mutual funds between 1st April, 2023 and now and enjoyed capital gains on it, you will have to add that to the advance tax calculation as well, if you haven’t already paid tax on it when the 1st and 2nd instalments were due on 15th June and 15 Sept. Long term capital gains or LTCG on Equity funds above Rs. 1 lac are taxed at 10%, Short term capital gains or STCG on Equity funds are taxed at 15% , LTCG and STCG on debt funds are taxed as per the slab. So add the figure to your total annual tax liability and then ensure you pay off 75% of that figure by the 15th of Dec to avoid interest.

Failure to pay advance tax on due dates attracts penal interest under sections 234B and 234C. The interest under section 234B is 1% per month of delay in payment of advance tax or shortfall in the tax payment.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.