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In India, advance tax refers to the activity of paying a portion of your taxes before the financial year ends. According to Section 208 of the Income Tax 1961, every individual whose estimated income tax liability for a given financial year is Rs 10,000 or more should pay his or her tax in advance, hence the term ‘advance tax ‘pay-as-you-earn’ scheme. The payment of the advance tax must be made in the financial year in which the taxpayer receives the income.
The primary benefit of paying advance tax is that you do not have to pay the whole tax at one go, once the financial year ends. The payment of advance tax is to be made in four instalments within the stipulated due dates of advance tax payment.
Accordingly, taxpayers are expected to pay at least 15% of their income tax liability on or before 15th June, 45% by 15th September, not less than 75% by 15th December, and the total tax liability calculated by 15th March of each financial year. Depending upon the changing income estimates, the advance tax payable may reduce or increase as the instalments progress.
| Due Date | Amount payable |
|---|---|
| Before September 15 | >= 30% of total advance tax liability |
| Before December 15 | >= 60% of total advance tax liability |
| Before 15th March | 100% of the total advance tax liability |
| Due Date | Amount payable |
|---|---|
| Before 15th June | >=15% of total advance tax liability |
| Before September 15 | >=45% of total advance tax liability |
| Before December 15 | >=75% of total advance tax liability |
| Before 15th March | 100% of the total advance tax liability |
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In the case of salaried individuals, there is no need for them to pay advance tax, as it is their employer’s responsibility to deduct tax at source (or TDS). Payment of advance tax is applicable in cases wherein an individual has other sources of income, apart from a fixed salary. Thus, incomes earned from sources such as capital gains on shares, lottery winnings, interest on fixed deposits, capital gains on house property, or salaried income are subject to advance tax payment after adjusting for any expenses or losses.
You must consider here that while your employer may deduct TDS on your salary, the advance tax is paid on income which is not subject to TDS.
To pay advance tax, individual taxpayers may use tax payment challans at any of the authorised bank branches or pay online through the National Securities Depository or the Income Tax department. Alternatively, taxpayers can also pay advance tax to the Reserve Bank of India
In case you miss the deadline or pay less than the mandatory percentage of the advance tax, you would have to pay an additional amount as interest. This interest amount is calculated at 1% per month simple interest (for three months) on the defaulted amount. Moreover, the same interest penalty would be applicable if you miss out on the second consecutive deadline. In case you continue to miss out on the payment of advance tax on or before the final deadline (i.e., 15th March), you would have to pay 1% simple interest for every month until you fully pay the tax.
If you end up paying a higher advance tax, you would be eligible to receive a refund of the excess amount along with an interest amount calculated at 6% per annum (if the excess amount is more than 10% of the total tax liability).
Calculating advance tax involves estimating your total taxable income for the financial year, deducting eligible exemptions and deductions, and applying the applicable tax rates. The Income Tax Act has clear advance tax provisions that specify when and how tax payments must be made.
Advance tax payments are made in 4 instalments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15 of the FY.
Source: BusinessToday
To ensure the timely collection of taxes, the government has specified instalment deadlines for advance tax payments.
Due Date | % of Advance Tax Payable |
15th June 2025 | 15% of total tax liability |
15th September 2025 | 45% of total tax liability (cumulative) |
15th December 2025 | 75% of total tax liability (cumulative) |
15th March 2026 | 100% of total tax liability |
Taxpayers must ensure that they calculate and pay advance tax based on their estimated income for the year to avoid interest penalties under Sections 234B and 234C of the Income Tax Act.
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Paying advance tax on time is crucial to avoid unnecessary interest and penalties. The advance tax provisions under the Income Tax Act require taxpayers to make timely payments in four instalments throughout the financial year. But what happens if you miss a due date or fail to pay the required amount? Let’s break it down.
If you miss an advance tax payment or underpay your dues, you may have to pay interest under Sections 234B and 234C of the Income Tax Act.
Section 234B: If you fail to pay at least 90% of your total tax liability before the end of the financial year, you will be charged an interest of 1% per month or part of a month on the unpaid amount from April 1st of the assessment year until the payment date.
Section 234C: If you do not pay the prescribed percentage of advance tax within the due dates, you will be charged 1% interest per month on the shortfall for each instalment missed.
Apart from interest, non-payment of advance tax can lead to penalties imposed by the assessing officer. While there is no specific penalty provision under the advance tax section of the Income Tax Act, repeated non-compliance may invite scrutiny, additional fines, or even prosecution in extreme cases. The Income Tax Department may also adjust your refund against pending tax liabilities.
Yes, you can take steps to minimise your interest liability on advance tax:
Estimate your income accurately: Regularly review your earnings and tax liability to ensure you pay the correct amount in each instalment.
Pay shortfalls immediately: If you realise you’ve missed an instalment or underpaid, make the payment as soon as possible to reduce the interest accumulation.
Adjust tax-saving investments: If you anticipate a higher tax liability, consider making eligible investments under Sections 80C, 80D, or other deductions to reduce taxable income.
Understanding the provisions of advance tax helps taxpayers plan their tax payments efficiently and avoid unnecessary penalties. If your annual tax liability exceeds ₹10,000, ensure you meet the instalment deadlines to stay compliant with the advance tax provisions. Regular assessment of income and tax liability can help minimise interest costs and ensure hassle-free tax filing.
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