Advance income tax refers to a system where taxpayers are required to make advance payments of their income tax liability before the end of the tax year. It is a method used by tax authorities to ensure a regular flow of tax revenue throughout the year.
In many countries, individuals and businesses are required to pay income tax based on their estimated annual income. Rather than waiting until the end of the tax year to settle the entire tax liability, advance income tax allows taxpayers to make periodic payments in advance.
The amount of advance income tax is typically calculated based on the taxpayer's projected income for the year and the applicable tax rates. These payments are made in installments, which can be monthly, quarterly, or on other prescribed schedules, depending on the tax regulations of the country.
The purpose of advance income tax is to help taxpayers manage their tax obligations and prevent a large financial burden at the end of the tax year. By making regular advance payments, taxpayers can spread out their tax liability over the course of the year.
At the end of the tax year, when the actual income and tax liability are determined, the advance payments are reconciled. If the total advance payments made during the year exceed the final tax liability, the taxpayer may receive a refund. On the other hand, if the advance payments are less than the actual tax liability, the taxpayer will need to pay the remaining amount.
It's important to note that the specific rules and procedures for advance income tax can vary from country to country. Taxpayers should consult the tax laws and regulations of their respective jurisdictions or seek guidance from a tax professional to understand the requirements and implications of advance income tax in their specific case.
Wimax Company limited
Calculation of Advance income Tax (Closing Balance)
Year-2021
Opening cost (as on 1 July-2021) xxxx
Add: Advance tax paid during the year xxxx
Prior year Advance tax payment (xxxx)
Adjustment of advance tax for the (AY) (2020-2021) xxxx
Closing balance xxxx
Where Advance tax paid during the year:-
Tax on export Proceeds (AIT) (All bank) xxxx
Add: AIT (Import as per Bill of Entry) xxxx
Add: AIT (Vehicle) xxxx
Add: Share dividend xxxx
Add: FDR xxxx
Add: Trade license (renewal) xxxx
Total
Advance tax paid during the year xxxx