How to Calculate Advance Tax
If you are a salaried individual in India, your employer generally handles the tax on your salary through TDS, so you usually do not have to think about tax payments for your salary income. However, if you also earn interest from Fixed Deposits or savings bank accounts, that additional income may not have enough tax deducted on it. As a result, you might end up owing extra tax for the year. If the total extra tax you need to pay is more than ₹10,000, you are expected to pay it during the year itself, instead of waiting until tax filing time.
The advance tax schedule is:
| Due Date | Cumulative Tax to Be Paid |
|---|---|
| June 15 | 15% of total annual tax |
| September 15 | 45% of total annual tax |
| December 15 | 75% of total annual tax |
| March 15 | 100% of total annual tax |
Suppose you earned ₹50,000 as interest from FDs and savings accounts this year. Your employer has already deducted TDS on your salary, so the only tax you need to take care of is on this ₹50,000. If your applicable tax rate is 30%, then your tax on this interest income is ₹15,000. Since this amount is more than ₹10,000, you would pay it in installments according to the schedule above:
| Due Date | Cumulative Tax to Be Paid | Amount |
|---|---|---|
| June 15 | 15% of 15,000 | ₹2,250 |
| September 15 | 45% of 15,000 | ₹6,750 |
| December 15 | 75% of 15,000 | ₹11,250 |
| March 15 | 100% of 15,000 | ₹15,000 |
We are going to use sheets to automate this calculation so that you do not have to manually redo it every quarter. Sheets lets you write formulas directly on top of your actual financial transactions, and as you add or update entries in FinBodhi, the sheet recalculates automatically. This ensures your interest income, estimated tax, and upcoming advance tax amounts are always up to date.
We will start by setting up a simple set of transactions like the one shown below, which captures our opening balances, periodic interest credits, and advance tax payments for the financial year.
To calculate advance tax, we first need to figure out the income that is taxable. In our example, this mainly comes from interest earned on the FD and the savings bank account (SBI). Instead of computing this by hand every time, we can express the calculation once in sheets, and it will stay up to date as new transactions are added.
Sheets allows us to define our own values using variables. A variable simply holds the result of a calculation so we can refer to it later. We can also use basic arithmetic (addition, multiplication, percentages) directly, similar to a normal spreadsheet.
We start by defining fy_year. This helps us limit our calculations
to only the transactions that occurred within the financial year we
care about (in this case, April 1, 2024 to March 31, 2025). This is
useful because interest gets credited over time, and we only want to
include the amounts relevant to the current advance tax period.
Next, we use the
balance function to
calculate fd_interest. The balance function looks at the current
balance of an account. Here, we use it to get the amount currently
invested in the FD and multiply it by an estimated interest rate. This
gives us a simple way to approximate how much interest we will earn
from the FD during the year.
For the savings interest, we use the
cost function. To
understand why, recall that interest credits in your savings account
are recorded as
postings. Every
transaction consists of postings that offset each other: amounts on
the left side are negative, and amounts on the right side are
positive. Since the interest account appears on the left side of the
transaction, it is recorded as a negative number. The cost function
sums these postings. To convert that summed negative amount into a
positive interest value, we multiply it by -1.
Finally, we add fd_interest and savings_interest to compute
taxable_income. This value represents the income on which we will
calculate and plan our advance tax payments.
Next, we introduce a variable for the tax rate. This works the same way as any other value in the sheet. Assigning it once makes it easier to adjust later without changing multiple formulas.
We then define a query to identify all Advance Tax payments within the financial year. We filter by both the description and the date range so that any new Advance Tax payment added later in Finbodhi will automatically be included in the calculation.
With the taxable income and tax rate available, total_tax is
calculated by multiplying the two. This gives us the total tax owed
for the financial year.
Finally, we calculate how much tax has already been paid. Here we use
the cost function on the advance tax postings. Since these tax
postings appear on the right side of the transaction, they are
positive already, so we do not need to adjust the sign.
Now that we know how much tax is owed and how much has already been
paid, the next step is to understand how much should be paid by each
advance tax deadline. To do this, we first define four dates: June 15,
September 15, December 15, and March 15. These act as reference points
we will use in our calculations. Assigning them to names (june15,
sep15, etc.) makes the formulas easier to read and change later if
needed.
We then calculate how much tax is ideally paid by each of these
dates. For example, by June 15, the expectation is that 15 percent of
the total tax is paid. So, we compute total_tax * 15% to find that
amount. From this, we subtract the tax payments already made on or
before that date. This tells us whether we still need to pay more or
if we are already ahead (negative). We repeat the same approach for
the September, December, and March deadlines.
These calculations will continue to update automatically every time you add interest income or tax payments transaction are recorded. And when the next financial year begins, you can reuse the same setup by updating just the date range and deadlines at the top.