Legal Reference
Sections 417-420 (advance tax), ITA 2025 | Four instalments for regular taxpayers | Single instalment for 44AD/44ADA | Due dates: 15 June (15%), 15 Sept (45%), 15 Dec (75%), 15 March (100%) | Senior citizens without business: exempt
1. What is Advance Tax?
Advance tax is income tax paid in instalments during the Tax Year — before filing the ITR — on estimated income for that year. If total tax liability (after TDS) exceeds Rs 10,000 in a Tax Year, the taxpayer must pay advance tax. Non-payment or under-payment of advance tax attracts interest under Sections 417 and 418 of ITA 2025.
2. Advance Tax Instalments: Due Dates
| Instalment | Due Date | Minimum Amount |
|---|
| 1st instalment | 15 June 2026 | 15% of annual estimated tax |
| 2nd instalment | 15 September 2026 | 45% of annual estimated tax (cumulative) |
| 3rd instalment | 15 December 2026 | 75% of annual estimated tax (cumulative) |
| 4th instalment | 15 March 2027 | 100% of annual estimated tax (cumulative) |
3. Who Must Pay Advance Tax
- Any taxpayer with estimated tax liability above Rs 10,000 (after TDS) must pay advance tax
- Salaried employees: employer deducts TDS each month — advance tax is only needed on non-salary income (freelance, capital gains, interest if not covered by TDS)
- Senior citizens (60+) without business/profession income: EXEMPT from advance tax
- Presumptive taxpayers (44AD/44ADA): single instalment by 15 March
4. Estimating Annual Income
Advance tax is based on estimated annual income — not just income earned till the instalment date. At each due date, revise the estimate based on:
- Actual salary received and TDS deducted so far
- Estimated capital gains (from equity sales, property sales planned)
- Business income trends
- Interest income projected for the full year
- Deductions to be claimed
5. Advance Tax on Capital Gains
Capital gains from shares, mutual funds, or property can be sudden and unpredictable. If you sell an asset and have large capital gains, you must pay advance tax by the next instalment deadline. If capital gains arise after 15 March (i.e., in the last part of the Tax Year), advance tax on those gains can be paid by 31 March without any interest under Section 417.
6. Interest for Non-Payment
If advance tax is not paid or is short-paid:
- Section 417 (234C equivalent): 1% per month for 3 months on shortfall at each instalment date
- Section 418 (234B equivalent): 1% per month from 1 April to payment date if total advance tax paid is below 90% of assessed tax
- Example: If assessed tax = Rs 2L, TDS = Rs 50K, advance tax = Rs 1.2L (total = Rs 1.7L = 85%), Section 418 interest applies on Rs 10K shortfall (90% = Rs 1.8L; paid Rs 1.7L)
7. Why TaxClue
Advance tax computation requires estimating annual income accurately — including capital gains and business income. Under-estimation leads to interest. TaxClue provides quarterly advance tax computation 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.
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❓ Frequently Asked Questions
What are the advance tax due dates?
For Tax Year 2026-27, advance tax instalment due dates are: 15 June 2026 (at least 15% of estimated annual tax); 15 September 2026 (at least 45% cumulative); 15 December 2026 (at least 75% cumulative); and 15 March 2027 (100% cumulative). Presumptive taxpayers under Section 44AD and 44ADA pay the entire advance tax in one instalment by 15 March 2027. Senior citizens without business income are exempt from advance tax entirely.
When is advance tax required for capital gains?
Capital gains arise on the date of sale. If capital gains occur before 15 March, advance tax should be included in the next instalment computation. If capital gains occur between 15 March and 31 March (the final days of the Tax Year), advance tax on those gains can be paid by 31 March — the last day of the Tax Year — without attracting Section 417 interest. This late-year provision prevents undue hardship for unexpected capital gains.
What is the interest for not paying advance tax?
Two types of interest apply: Section 417 (234C equivalent) charges 1% per month for 3 months (or 1 month for the last instalment) on any shortfall at each instalment due date. Section 418 (234B equivalent) charges 1% per month from 1 April to the date of actual payment if total advance tax paid is less than 90% of assessed tax. Both interest charges are mandatory — the AO has no discretion to waive them.
Do salaried employees need to pay advance tax?
Salaried employees whose entire tax is covered by employer TDS generally do not need to pay advance tax separately. However, if they have significant income not covered by TDS — freelance income, capital gains from shares, FD interest not covered by Form 15G/15H, rental income — the additional tax on such income above Rs 10,000 must be paid as advance tax. The employer TDS is automatically credited against the total advance tax obligation.
How do I calculate advance tax?
Step 1: Estimate total annual income from all sources (salary, business, capital gains, interest, rent). Step 2: Deduct applicable deductions (standard deduction, Section 123, home loan interest under old regime). Step 3: Compute income tax on net taxable income at current year slab rates. Step 4: Subtract TDS already/expected to be deducted during the year. Step 5: The net amount is your advance tax liability — pay in instalments as per the quarterly schedule.
