What is advance tax?
Advance tax means paying tax before filing the ITR (in advance). Instead of paying all your taxes at the time of filing your return, you are supposed to pay them during the financial year itself.
The 44ADA advantage
Freelancers earning less than ₹75 LPA who opt for Section 44ADA have a significant advantage: they need to pay their entire advance tax in a single installment by March 15. Unlike salaried individuals or businesses that pay in quarterly installments (June 15, September 15, December 15, March 15), 44ADA assessees get the full year to pay.
How to calculate
Step 1: Estimate your total professional receipts for the year. Step 2: Calculate 50% as presumptive profit (under 44ADA). Step 3: Apply the applicable income tax slab rates. Step 4: Pay 100% of the calculated tax by March 15.
Interest for non-payment
If you fail to pay advance tax or pay less than 90% of your assessed tax, you will be charged interest under Section 234B at 1% per month on the shortfall. Additionally, Section 234C may apply for deferment of advance tax installments.
Pro tip
Set aside 5-10% of each payment you receive from clients into a separate savings account. This makes the March 15 advance tax payment painless because the money is already set aside.