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Advance Tax

Tax

Quarterly Advance Tax Payment

Income tax paid in quarterly instalments during the financial year itself, rather than as a lump sum at the end. Mandatory for taxpayers with a tax liability exceeding ₹10,000 in a year after accounting for TDS.

Definition

Advance tax is the income tax paid in instalments during the financial year — before the filing of the income tax return — as opposed to paying the full tax in a lump sum at year-end. It operates on the principle of "pay as you earn," distributing the tax burden across the year.

Advance tax is mandatory when estimated tax liability (after TDS and other credits) exceeds ₹10,000 for a financial year. For salaried employees, the employer's monthly TDS effectively serves as advance tax. For self-employed professionals, business owners, and investors with large non-salary income, separate advance tax payments are required.

Failure to pay advance tax on time attracts interest penalties under Sections 234B and 234C of the Income Tax Act.

Formula

Tax Liability = (Total Income − Deductions) × Applicable Slab Rate

Advance Tax Due = Tax Liability − TDS (expected) − Tax Credits (relief)

Instalment schedule (individual, non-presumptive):

  • By June 15: ≥ 15% of estimated tax
  • By September 15: ≥ 45% of estimated tax (cumulative)
  • By December 15: ≥ 75% of estimated tax (cumulative)
  • By March 15: 100% of estimated tax (cumulative)

Worked Example

Kavitha, a freelance architect, estimates her FY 2025–26 income at ₹22 lakh. She has no employer TDS.

Old regime tax (with ₹1.5L Section 80C deduction):

  • Taxable income = ₹20.5 lakh
  • Tax = ₹4,12,500 (approximately, including cess)

Advance tax schedule:

  • By June 15: 15% = ₹61,875
  • By Sept 15: 45% = ₹1,85,625 (cumulative)
  • By Dec 15: 75% = ₹3,09,375 (cumulative)
  • By March 15: 100% = ₹4,12,500 (cumulative)

She pays this via Challan 280 on the IT portal. When she files her ITR in July 2026, her advance tax payments are reflected and she may receive a small refund if actual income was slightly lower.

Key Things to Know

  • Capital gains and advance tax: Capital gains are often earned in lump sums (selling property, mutual funds). If you sell equity worth ₹50 lakh in November, you have a large LTCG/STCG that must be accounted for in the December 15 advance tax instalment. Waiting until March 15 would attract Section 234C interest.
  • Presumptive taxation simplification: Self-employed professionals with income up to ₹75 lakh (Section 44ADA) and businesses with turnover up to ₹3 crore (Section 44AD) opting for presumptive taxation can pay 100% of advance tax by March 15 in a single instalment — simplifying compliance significantly.
  • Online payment via Challan 280: Advance tax is paid online at the IT portal (e-filing portal) using Challan 280 under the "Advance Tax" option. Select the correct Assessment Year (AY) — advance tax for FY 2025–26 is paid under AY 2026–27.
  • Surcharge on advance tax: If your income exceeds ₹50 lakh, surcharge applies on the tax amount. This surcharge is part of your total tax liability and must be included in advance tax calculations and instalments.
  • Senior citizens: Resident senior citizens aged 60 or above who have no income from business or profession are exempt from advance tax. They pay the full tax due at time of ITR filing without interest penalties.

Related Calculators

Income Tax Calculator →Calculate income tax for FY 2025-26 under old and new tax regimes. Includes 87A rebate, surcharge, cess, and deductions (80C, 80D, HRA). India income tax.
Old vs New Tax Regime Calculator →Compare income tax under old and new regime for FY 2025-26. Enter your income and deductions to instantly see which tax regime saves you more money.

Related Terms

TDSTax Deducted at SourceITRIncome Tax ReturnNew Tax RegimeNew Tax Regime (Section 115BAC)Section 80CSection 80C — Income Tax Deduction
Frequently Asked Questions
Who needs to pay advance tax?
Any individual or entity whose estimated tax liability for the financial year exceeds ₹10,000 must pay advance tax. This applies to: self-employed professionals and consultants, business owners, individuals with substantial investment income (dividends, capital gains, interest from FDs), freelancers, and even salaried employees with significant income beyond salary (rent, investments). Salaried employees whose employer deducts TDS covering their full liability are generally exempt.
What are the advance tax payment deadlines?
For non-corporate taxpayers (individuals), advance tax is due in 4 instalments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15. These are cumulative percentages of the estimated annual tax. Taxpayers opting for presumptive taxation (Section 44AD/44ADA) can pay 100% by March 15 in a single instalment.
What penalty applies for non-payment of advance tax?
Interest under Section 234B applies if advance tax paid is less than 90% of assessed tax — 1% per month (or part) from April 1 until the date of assessment or actual payment. Interest under Section 234C applies for shortfall in individual instalments — 1% per month for 3 months on the shortfall (except the March instalment, where it's 1% for 1 month).
How do I calculate my advance tax liability?
Estimate total income for the year from all sources: salary, business profit, rent, interest, capital gains, dividends. Apply the applicable tax slab rates (new or old regime) to compute gross tax. Deduct TDS already deducted or expected to be deducted. The remaining tax due is your advance tax liability — if it exceeds ₹10,000, pay in the scheduled instalments.
Does TDS count towards advance tax?
Yes. TDS deducted by employers, banks, and other payers is credited against your total tax liability. If the total TDS is expected to cover your tax liability fully, no separate advance tax payment is needed. Many salaried employees with only salary income need not pay advance tax because their employer's TDS handles the full liability.