What is Installment?
Installment can be defined as a certain sum of debt or money, that can be divided into specific parts and are payable at specific terms of interval. When someone says that they are paying installments, it means that they are paying a sum of money in parts at various times. In such cases, the total amount of money along with the time is often stipulated.
So in easy words, when we pay in installments, we do not pay the total amount of money right away but we pay in small amounts over a certain specific time.
For example: Let us assume that someone is purchasing an expensive item from a seller, who has agreed to receive the total amount of money in installments. This means that the seller will continue to receive the money until the cost of the item is reached.
It is also possible for an individual to pay installments on a loan. Sometimes interests are also added with the number of installments.
So now we know that installments are sums of money paid in specific intervals. More often than not, installment payments end up benefiting both buyer and seller.
There are various advantages of installment payments. They are as follows-
● It helps you to keep a check on your finances.
● You can buy something at once without having to pay the full amount.
● It stays within your budget as installments are small amounts of money.
● The amount to be paid monthly or quarterly is low.
There are various advantages for the seller as well:
● Allows customers to buy things with more flexibility.
● Increase in sales.
There are various kinds of installments like- installment sales between buyers and sellers, installment loans, and installment debts.
While selling real estate properties, attracting a qualified buyer with enough cash on hand is every realtor wish. But it so happens that there is a certain amount of seller financing. During such instances, the seller often receives the entire sum of the purchase after a year of sale. This means that the applicable exceptions are absent. These kinds of sales are termed 'installment sales' under the Internal Revenue Code. Any such sale falls under the method of installments.
A lot of people make use of the term 'installment sale' to explain both sale and tax on gain. Even though they are very closely related, the installment sale and installment method are two different entities.
