Guides · Bookkeeping
Advance tax basics
Advance tax is income tax paid in installments across the year, as the income is earned, rather than in a lump sum afterward. For a business with a real tax liability, planning for it avoids a year-end shock.
Why tax is paid in advance
The idea is to collect tax as income arises rather than only after the year ends. A taxpayer whose liability crosses a threshold pays it in scheduled installments through the year.
Paying as you go spreads the burden and keeps a business from facing its whole tax bill in one go, plus interest for having paid late.
Planning for it
Advance tax rests on estimating the year's profit and paying tax on it in stages. That estimate is only as good as the books behind it, which is why current records matter.
The exact installment dates and proportions are set by the tax rules and can change, so confirm the current schedule and thresholds for your case.
How Lekha fits
Lekha keeps receivables, payables, and net position current, which is the running picture an advance-tax estimate draws on. It records and tracks; it does not compute or pay your tax.
Lekha records what your documents say and tracks the money on both sides — what you owe and what you are owed. It records and tracks; it does not replace your accountant.
Questions
- What is advance tax?
- Income tax paid in installments through the year as income is earned, rather than as a lump sum after the year ends. It applies once a liability crosses a threshold.
- Who has to pay advance tax?
- Taxpayers whose tax liability for the year crosses the set threshold. Confirm the current threshold and installment schedule for your situation.
- How do I estimate advance tax?
- From an estimate of the year's profit and the tax on it, paid in stages. Current books make that estimate reliable rather than a guess.
This guide is general information, not legal or tax advice. Confirm the current rules and your own circumstances for any specific case.