Personal Finance

Tax Query: Do early retirees have to pay advance tax?

Sanjiv Chaudhary | Updated on October 23, 2021

I retired early at the age of 50. The only sources of my income are capital gains from mutual funds and stocks, and interest income. Do I have to pay advance tax?

Vijaya Kumar

As per the provisions of Section 208 of the Income-tax Act, 1961 (‘the Act’), every person whose tax liability (after considering the Tax paid viz. Tax deducted at Source / Tax Collected at Source, if any, for your case) on the estimated total taxable income, for the Financial Year (FY) exceeds ₹10,000, is required to pay taxes in advance in 4 prescribed quarterly instalments —June 15, Sep 15, Dec 15 and March 15 during the said FY.

As per Section 207 of the Act, Resident individuals who is of the age of 60 years or more and not having income under the head Profits and Gains of business and profession’ are not required to pay advance taxes.

Advance tax is required to be paid on capital gains. However, as one cannot estimate the exact capital gain in advance (unless it actually materialises), hence if taxpayer has made any capital gain after the due dates of advance tax instalment, then such tax liability is required to be paid in remaining instalments. Interest for shortfall in payment of advance tax on account of capital gains would not be applicable for the previous instalments.

In case you estimate the total tax liability on your estimated taxable income (Capital Gains and Interest) to exceed ₹ 10,000 (after considering the tax deductible/collectible at source), you would be required to pay taxes by way of advance tax in the four prescribed instalments.

The writer is a practising chartered accountant

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Published on October 23, 2021

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