Advance Tax Planning for NRIs: How to Pay & Claim Refunds in India

Advance tax is a procedure of paying income tax in advance during the financial year, instead of paying the whole amount in a lump sum after the financial year ends. The advance income tax payment, also referred to as pay-as-you-earn tax, is made in installments according to the date scheduled by the Income Tax Department of India.

For Non-resident Indians, understanding India's tax obligations is crucial to ensure compliance with Indian income tax law and avoid penalties. In this blog, we cover everything a non-resident Indian must know about advance tax payments, including how to pay, its importance, the due date for the current financial year, and more.

Who Should and Should Not Pay Advance Tax

Below is a list of people who are liable to pay the advance income tax.

• All taxpayers, such as businesses, freelancers, and salaried individuals, with an estimated income tax liability of INR 10,000 or more after the TDS/TCS deduction and MAT credit.
• For a salaried individual, as the employer already deducts their tax at source (TDS), salaried individuals are only eligible to pay advance tax if they have an additional income, which then leads to additional tax liability, like dividends, house property, interest, business income, etc., and have an income tax liability of approximately INR 10,000 or more.
• Non-resident Indians with income sources in India and an estimated tax liability of INR 10,000 or more.
• Professionals and businesses who are taxed on a presumptive basis are eligible to pay advance tax if their approximate income tax liability is around INR 10,000 or more.

Who Should Not Make an Advance Income Tax Payment?

Senior citizens who are 60 years and above and are Indian residents have no income from either business or profession.

Due Dates of Advance Tax Payment

The payment of advance income tax is divided into four installments, with a specified due date for every installment by the Income Tax Department of India.

For Regular Taxpayer

According to Sections 234B and 234C of the Income Tax Act, 1961, if a taxpayer misses the due date of the installment or has underpaid the tax, then in such cases it can lead to interest. These sections impose interest for late payment or underpayment of advance tax, leading to an increase in the amount of taxes payable.

Note: Interest under Section 234C generally applies if advance tax paid is less than the prescribed cumulative percentage (15%, 45%, 75%, and 100%) by the respective due dates.

For Taxpayers Opting for Presumptive Taxation

For small businesses or freelancers required to opt for presumptive taxation schemes under Sections 44AD and 44ADA, the due date for paying advance tax is as follows.

Note: Taxpayers opting for the presumptive taxation scheme also have the option to pay all their taxes by 31st March of the financial year. However, persons engaged in business covered under Section 44AE may be required to follow advance tax provisions similar to regular taxpayers based on their tax liability.

How to Calculate Advance Tax

The table below will help you better understand how to calculate your advance tax.

For June, September, December, and March, respectively, the advance tax liability will be 15%, 45%, 75%, and 100% of the net tax liability.

Process to Pay Advance Tax For NRIs

Non-resident Indians can make an advance tax payment by using Challan 280, which is designated for paying taxes in India. The advance taxes can be paid in two ways.

Online Method

Step 1: Go to the e-filing portal of the Income Tax Department of India.

Step 2: On the left side of the home page, there is a section named Quick Links. Click on the e-pay tax option there. Alternatively, you can search for the e-pay tax section on the website.

Step 3: On this page, enter your PAN number and confirm it by re-entering it. Then, enter your mobile number and click Continue.

Step 4: Now, an OTP will be sent to your mobile number. Enter the OTP and click Continue.

Step 5: Select the first box, labeled "Income Tax," and then click on "Proceed."

Step 6: Now, the taxpayer will select the assessment year as 2026-27 and the type of payment as Advance Tax (100), then click Continue.

Step 7: Enter all the tax details asked for in the respective fields.

Step 8: Select your payment method and bank, then click Continue.

Step 9: Preview the challan details and then click Pay Now. You can further edit these details if needed.

Step 10: Once the taxpayer has completed the payment, they will receive an acknowledgment on the next screen, where the BSR code and challan verification number will be reflected. Save a copy of this tax receipt for future reference, as you will need to enter the challan number and BSR code when filing your Income Tax Return.

At Bank Branches

Non-resident Indians can also visit the designated branch of their respective banks and use Challan 280 for making payments manually.

NRIs must ensure they carry all the required documents, such as PAN and other necessary identification documents.

Once the amount has been paid, a receipt will be generated, which must be kept for future reference. The taxpayer will need this receipt for future tax filing and claiming any refunds.

How to Claim Refunds for NRIs

For non-resident Indians to claim any tax refund for any excess taxes paid, they must file their Income Tax Return for the applicable financial year. Here is how you can do so.

1. File Your Income Tax Return (ITR)

• NRIs must ensure that Form 26AS reflects all TDS credits and tax payments made, including advance income tax.
• Fill out the Income Tax Return form accurately and provide all the details asked about your income, deductions, tax payments, etc.

2. Verify the ITR

• After submitting the ITR, the Income Tax Department will process it and verify all the details that have been provided.
• NRIs must verify their income tax return through methods such as digital signature (DSC), Aadhaar OTP (if applicable), net banking, etc.

3. Refund Processing

• In case there is excess tax paid, the Income Tax Department will process the refund once the ITR has been verified.
• Tax refunds are generally credited to the pre-validated bank account linked with the taxpayer’s PAN.

Non-resident Indians must ensure that all tax deductions and payments are accurately reflected in their Income Tax Return (ITR) to avoid any hassles in receiving their refund.

Why is Advance Income Tax Important?

Advance tax is essential for:

Effective Tax Planning: Advance tax requires the taxpayer to estimate their total income and tax liability at the start of the financial year. This estimate enables taxpayers to analyze income sources and applicable deductions early, allowing them to plan taxes efficiently.

Late Payment Interest: Advance tax payment installments, if made by the due date, allow taxpayers to avoid late payment interest or penalties.

No Lump Sum Amount: Taxpayers with high tax liability often prefer advance tax payments because it splits tax payments into manageable installments.

File Smart With SaveTaxs

Paying your advance tax on time is crucial; otherwise, you may incur interest under Sections 234C and 234B at approximately 1% per month, increasing your tax liability. However, if you need help or expert consultancy with filing advance taxes, ITR, TDS, TDS refunds, or more, the experts of SaveTaxs are here to help you 24/7 across all time zones.

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