Advance tax is a system in India where taxpayers pay their income tax in parts during the financial year, instead of in a single lump sum at year-end. It’s called a “pay-as-you-earn” system and helps avoid a big tax payment or interest charges later.
Who Must Pay?
You’re required to pay advance tax if:
- Your total tax liability (after TDS/TCS) for the year exceeds ₹10,000.
- Includes salaried individuals with other income (rent, interest, capital gains), freelancers, professionals, and businesses .
- Exceptions:
- Resident senior citizens (60+) with no business/professional income.
- Individuals/content with only salary and sufficient TDS, if tax liability ≤ ₹10,000.
Due Dates & Installments (FY 2025–26)
For regular taxpayers (non‑presumptive):
| Installment | Due On | Cumulative % of Tax |
|---|---|---|
| 1st | 15 June 2025 | 15% |
| 2nd | 15 September | 45% |
| 3rd | 15 December | 75% |
| 4th | 15 March 2026 | 100% |
Presumptive scheme taxpayers (under Sec 44AD/44ADA) pay the full advance tax in one go by 15 March 2026.
How to Calculate Advance Tax
- Estimate total income from all sources (salary, business, rent, capital gains, interest).
- Deduct eligible deductions (like under Sections 80C, 80D, etc.).
- Apply tax slab rates to calculate gross tax liability + cess/surcharge.
- Subtract TDS/TCS already deducted or expected.
- If net tax liability > ₹10,000, compute installment amounts per schedule:
- e.g., for ₹1,00,000 tax due: 1st = ₹15,000; by Sep should be ₹45,000 (so next ₹30,000).
Interest for Late/Short Payments
Missing or underpaying installments may lead to:
- Section 234C: 1% per month interest for the delay in each installment.
- Section 234B: If total advance tax paid is less than 90% by 31 March, interest @1% per month on the shortfall.
How to Pay Advance Tax Online
- Visit the Income Tax e-Filing portal → select e-Pay Tax.
- Enter PAN and mobile, authenticate with OTP.
- Choose Income Tax and Advance Tax (100) for the relevant assessment year.
- Enter tax amount, select payment method (Net Banking/UPI/Debit Card).
- Complete payment and save the BSR code and Challan Serial Number for return filing.
Quick Example
Ajay estimates ₹200,000 total tax liability:
- After ₹50,000 TDS, net due = ₹150,000 (>₹10k, so advance tax applies).
- Installments:
- By 15 June → ₹22,500 (15% of ₹150k)
- By 15 Sept → ₹67,500 total (another ₹45,000)
- By 15 Dec → ₹75% overall = ₹112,500 (another ₹45,000)
- By 15 Mar → remaining ₹37,500
- Any delay or shortfall incurs interest under Sections 234B/234C.
Why It Matters
- Prevents penalty interest charges.
- Helps you manage finances by splitting tax payments.
- Keeps tax compliance smooth and stress-free.
