Advance tax requires taxpayers to pay their estimated income tax during the financial year in instalments rather than paying the entire liability when filing their income tax return. The provisions governing advance tax are covered under Sections 403 to 410 of the Income Tax Act, 2025.
Who needs to pay advance tax?
Advance tax applies to taxpayers, including salaried individuals, freelancers, professionals and businesses, whose estimated tax liability for a financial year, after accounting for TDS and TCS, exceeds ₹10,000.
For salaried taxpayers, advance tax may become applicable when they have additional income that is not fully covered by TDS. This can include income from stock sales, cryptocurrency gains and rental income. Freelancers and consultants, as well as individuals earning rental income, may also need to pay advance tax.
What happens if you miss the deadline?
A delay or shortfall in advance tax payment can lead to interest being charged. Interest may apply at 1% per month or part of a month for the applicable period when the required advance tax has not been paid.
Interest can also become applicable if the advance tax paid by the end of the financial year is less than 90% of the final tax liability. This means that paying the remaining tax while filing the income tax return does not necessarily eliminate the interest liability arising from inadequate advance tax payment.
Advance tax is paid during the financial year; it is not something that is technically “filed”. The payment is subsequently reported while filing the income tax return.
What if you missed the June 15 instalment?
Taxpayers who missed the June 15 deadline can still make the payment along with any applicable interest. Missing the first instalment does not mean the September instalment can be skipped.
For instance, if the estimated advance tax liability for FY 2026-27 is ₹1 lakh, the June instalment was 15%, or ₹15,000. If that payment was missed, the taxpayer can still pay the ₹15,000 later, along with applicable interest.
The September instalment is 45% of the estimated tax liability, after accounting for taxes already paid. In this example, that would be ₹45,000, taking the cumulative advance tax payment to 60% of the estimated liability.
How is interest calculated?
Under Section 234C, interest is charged at 1% per month on the shortfall when advance tax is not paid according to the prescribed instalment schedule. Even a delay of a few days can attract interest for one month because a part of a month is treated as a full month for this calculation.If at least 90% of the total tax liability has not been paid by March, interest under Section 234B can also apply. In such cases, simple interest is charged at 1% per month on the unpaid amount from April 1 of the following year until the payment is made.
The interest is generally calculated automatically while preparing the income tax return.
Advance tax schedule for FY 2026-27
- June 15: 15% of the advance tax is payable.
- September 15: 45% of the advance tax is payable, after deducting taxes already paid.
- December 15: 75% of the advance tax is payable, after deducting taxes already paid.
- March 15: The remaining advance tax balance is payable after deducting taxes already paid.
