Explain in brief the provisions of income tax law relating to advance payment

provisions of income tax law

The provisions of the Income Tax Law relating to advance payment require taxpayers to make estimated payments of their tax liability throughout the year, rather than just at the end of the year. The purpose of this requirement is to ensure that taxpayers meet their tax obligations in a timely manner, and to avoid penalties and interest for underpayment of taxes.

The following are some key provisions of the Income Tax Law relating to advance payment:

1. Advance tax payment: Taxpayers are required to estimate their tax liability for the year and pay taxes in advance in four installments during the year. These installments are due on or before June 15, September 15, December 15, and March 15 of the following year.
2. Penalty for underpayment: Taxpayers who do not pay the required amount of tax in advance may be subject to a penalty for underpayment of estimated tax. The penalty is calculated based on the amount of underpayment and the period of underpayment.
3. Safe harbor provisions: Taxpayers who pay at least 90% of their current year tax liability through estimated tax payments or have paid 100% of the prior year tax liability (110% for higher-income taxpayers) through estimated payments and withholding are generally not subject to underpayment penalty.
4. Adjustments to estimated tax payments: Taxpayers may make adjustments to their estimated tax payments throughout the year if their income or deductions change. This can be done by submitting a revised estimated tax payment or adjusting the subsequent estimated tax payments

Summary

In summary, advance payment of income tax is a critical component of the Income Tax Law, and taxpayers are required to make estimated tax payments throughout the year to meet their tax obligations in a timely manner and avoid penalties for underpayment.

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