Legal Reference
Sections 417-420 (advance tax), ITA 2025 | Four instalments | Capital gains advance tax flexibility | Senior citizen without business exempt | Presumptive single instalment 15 March
1. Advance Tax: Pay As You Earn
Advance tax is the mechanism that ensures tax is collected throughout the year — not just at ITR filing. If estimated tax liability (after TDS) exceeds Rs 10,000, advance tax must be paid in quarterly instalments. Failure or shortfall attracts mandatory interest under Sections 417 and 418 — with no discretion to waive.
2. Quarterly Schedule
| Instalment | Due Date | Cumulative % Required |
|---|
| 1st | 15 June 2026 | 15% of estimated annual tax |
| 2nd | 15 September 2026 | 45% cumulative |
| 3rd | 15 December 2026 | 75% cumulative |
| 4th | 15 March 2027 | 100% cumulative |
3. How to Estimate Business Advance Tax
For businesses, the advance tax estimate at each instalment date:
- Estimate annual business income based on YTD actuals
- Deduct expected deductions (depreciation, expenses, Chapter VIII if old regime)
- Compute estimated tax at current year slab/rate
- Subtract TDS already deducted on business receipts (professional fees, rent etc.)
- Balance = advance tax to pay cumulatively by that date
4. Capital Gains Flexibility
Capital gains (from share sales, property, mutual funds) can arise unpredictably. Special rule: if capital gains arise after the 15 March instalment date but before 31 March (year-end), the advance tax on those gains can be paid by 31 March without any Section 417 deferral interest. This gives flexibility for late-year capital gains events.
5. Presumptive Taxpayers: One Instalment
Businesses using Section 44AD and professionals using Section 44ADA pay the entire advance tax in a single instalment by 15 March — no quarterly instalments required. However, if this payment is missed or short-paid, Section 417 interest applies for one month on the shortfall.
6. Advance Tax Payment Method
Pay advance tax online at incometax.gov.in:
- Go to e-Pay Tax → Income Tax → Advance Tax (Code 100)
- Enter PAN, assessment year (AY 2027-28 for Tax Year 2026-27)
- Pay by net banking, debit card, UPI, or RTGS
- Download and save challan
7. Why TaxClue
Accurate advance tax computation prevents interest charges and ensures smooth year-end. TaxClue provides quarterly advance tax estimates and reminders. Contact us under ITA 2025.
Disclaimer
This article is for general informational and educational purposes only. It does not constitute legal, financial, or professional tax advice. Readers are advised to consult a qualified Chartered Accountant or tax professional before making any decisions. TaxClue Consultech Pvt Ltd accepts no liability. All case studies and examples in this article are illustrative only and do not represent actual persons or transactions.
Need Help with Compliance?
Our CA experts guide you through the entire process — registration to filing.
❓ Frequently Asked Questions
How is advance tax paid for a business?
Business owners must pay advance tax in four quarterly instalments: 15 June (15% of estimated annual tax), 15 September (45% cumulative), 15 December (75% cumulative), and 15 March (100%). Estimate annual business income based on year-to-date actuals, deduct expected expenses and deductions, compute tax, subtract TDS on business receipts, and pay the cumulative balance by each due date. Pay online at incometax.gov.in → e-Pay Tax → Advance Tax (Code 100).
What if capital gains arise late in the year?
If capital gains (from shares, property, mutual fund sale) arise after the 15 March instalment date but before 31 March (end of Tax Year), the advance tax on those specific gains can be paid by 31 March — the last day of the Tax Year — without attracting Section 417 deferral interest. This provision recognises the unpredictable nature of capital gains events near year-end.
What interest applies for missing advance tax instalments?
Section 417 (234C equivalent) of ITA 2025 charges 1% per month for 3 months (or 1 month for the last instalment) on any shortfall at each quarterly due date. Additionally, Section 418 charges 1% per month from 1 April to payment date if total advance tax paid is below 90% of final assessed tax. Both are mandatory — the AO cannot waive them.
Do 44AD businesses need quarterly advance tax?
No. Businesses using Section 44AD presumptive scheme pay all advance tax in a single instalment by 15 March — not in four quarterly instalments. Same for Section 44ADA professionals and Section 44AE transport operators. If the 15 March payment is missed or short-paid, Section 417 applies for one month on the shortfall.
How do I pay advance tax online?
Pay advance tax at incometax.gov.in: Go to 'e-Pay Tax' → Select 'Income Tax' → Select challan type 'Advance Tax (Code 100)' → Enter PAN and Assessment Year (AY 2027-28 for Tax Year 2026-27) → Enter amount → Pay via net banking, debit card, UPI, or RTGS/NEFT. Download and save the challan receipt showing BSR code, serial number, and date — needed for ITR filing and to match with Form 26AS.
