Advance Tax explained: this guide covers what Advance Tax means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
What is Advance Tax?
Advance tax is income tax paid in instalments during the financial year, rather than as a lump sum at the end. It is sometimes called "pay as you earn" tax. If your total tax liability for the year (after TDS) exceeds ₹10,000, you are required to pay advance tax.
Advance tax applies to all taxpayers — salaried employees (if TDS is insufficient), freelancers, self-employed professionals, business owners, traders, and those with capital gains, rental income, or dividend income.
- Any person whose estimated tax liability for the year is ₹10,000 or more after TDS
- Senior citizens (60+) are exempt from advance tax — but only if they do NOT have income from business or profession
- Presumptive taxation scheme taxpayers (Section 44AD / 44ADA) can pay advance tax in a single instalment by 15 March
Advance Tax Due Dates for FY 2025-26
For individuals and companies (other than presumptive scheme), advance tax is paid in 4 instalments:
| Instalment | Due Date | Cumulative % of Tax Payable |
|---|---|---|
| 1st Instalment | 15 June 2025 | At least 15% |
| 2nd Instalment | 15 September 2025 | At least 45% |
| 3rd Instalment | 15 December 2025 | At least 75% |
| 4th Instalment | 15 March 2026 | 100% |
For Presumptive Scheme Taxpayers (Section 44AD / 44ADA)
| Who | Due Date | Amount |
|---|---|---|
| Business (Section 44AD) | 15 March 2026 | 100% of tax liability |
| Professionals (Section 44ADA) | 15 March 2026 | 100% of tax liability |
How to Calculate Advance Tax
Advance tax is calculated on your estimated total income for the financial year. Follow these steps:
Step 1: Estimate Total Income
Add all expected income sources for FY 2025-26:
- Salary income (after standard deduction of ₹75,000)
- Income from house property (rental income less 30% standard deduction)
- Capital gains (STCG and LTCG)
- Business/profession income
- Other sources (interest, dividends, etc.)
Step 2: Compute Gross Tax Liability
Apply the applicable tax slab (new regime or old regime) to your estimated total income. Add surcharge and 4% health and education cess.
Step 3: Subtract TDS
Deduct TDS already deducted or expected to be deducted by employer, bank, tenant, etc.
Step 4: Check if Advance Tax is Required
If (Gross Tax - TDS) > ₹10,000 ÔåÆ Advance tax is required.
Step 5: Calculate Each Instalment
| Instalment | Amount to Pay |
|---|---|
| 1st (by 15 June) | 15% of estimated annual tax - TDS paid so far |
| 2nd (by 15 Sept) | 45% of estimated annual tax - TDS paid so far - advance tax paid |
| 3rd (by 15 Dec) | 75% of estimated annual tax - TDS paid so far - advance tax paid |
| 4th (by 15 Mar) | 100% of estimated annual tax - TDS paid so far - advance tax paid |
Advance Tax Calculation Example
Mr. Sharma (salaried + freelance income) estimates for FY 2025-26:
| Income Head | Amount |
|---|---|
| Salary (after standard deduction) | ₹12,00,000 |
| Freelance income | ₹5,00,000 |
| Interest income | ₹50,000 |
| Total estimated income | ₹17,50,000 |
Tax under new regime (FY 2025-26):
| Slab | Income | Tax |
|---|---|---|
| Up to ₹4,00,000 | ₹4,00,000 | ₹0 |
| ₹4,00,001 – ₹8,00,000 @ 5% | ₹4,00,000 | ₹20,000 |
| ₹8,00,001 – ₹12,00,000 @ 10% | ₹4,00,000 | ₹40,000 |
| ₹12,00,001 – ₹16,00,000 @ 15% | ₹4,00,000 | ₹60,000 |
| ₹16,00,001 – ₹17,50,000 @ 20% | ₹1,50,000 | ₹30,000 |
| Gross tax | ₹1,50,000 | |
| Add: 4% cess | ₹6,000 | |
| Total tax liability | ₹1,56,000 |
TDS deducted by employer: ₹80,000
Net advance tax liability: ₹1,56,000 - ₹80,000 = ₹76,000
Advance tax schedule:
| Instalment | Cumulative % | Cumulative Amount | Already Paid (TDS) | To Pay Now |
|---|---|---|---|---|
| By 15 June 2025 | 15% | ₹23,400 | ₹20,000 | ₹3,400 |
| By 15 Sept 2025 | 45% | ₹70,200 | ₹40,000 | ₹26,800 |
| By 15 Dec 2025 | 75% | ₹1,17,000 | ₹60,000 | ₹19,600 |
| By 15 Mar 2026 | 100% | ₹1,56,000 | ₹80,000 | ₹26,200 |
How to Pay Advance Tax Online
Advance tax is paid using Challan No. ITNS 280 on the Income Tax e-filing portal:
- Go to incometax.gov.in  e-Pay Tax
- Enter your PAN and confirm with OTP
- Select Income Tax  Advance Tax (100)
- Enter Assessment Year: 2026-27 (for FY 2025-26)
- Enter the advance tax amount
- Pay via Net Banking, Debit Card, UPI, or RTGS/NEFT
- Download the challan receipt (BSR code + Challan serial number required while filing ITR)
Advance Tax on Capital Gains
Capital gains may not be predictable in advance. Special rules apply:
- If capital gains arise after 15 September: The remaining instalments (15 Dec and 15 Mar) must include capital gain tax. No interest under 234C for the 1st and 2nd instalments.
- If capital gains arise after 15 December: The 15 March instalment must include capital gain tax. No interest for 1st, 2nd, or 3rd instalments.
- Entire capital gains tax (if gains arise in March) can be paid in the last instalment by 15 March.
- TDS under Section 194-IA (property sale) can be deducted from advance tax liability.
Penalty for Non-Payment of Advance Tax
Section 234B — Default in Payment
If advance tax paid is less than 90% of assessed tax, interest under Section 234B is charged:
- Rate: 1% per month (simple interest)
- Period: From April 1 of AY to date of payment of tax / date of processing of ITR
- Calculated on shortfall amount (assessed tax - advance tax paid - TDS)
Section 234C — Deferral of Instalments
Interest is charged if each instalment is short-paid:
| Instalment Shortfall | Interest Rate | Period |
|---|---|---|
| 1st instalment (15 June) — paid less than 15% | 1% per month | 3 months |
| 2nd instalment (15 Sept) — paid less than 45% | 1% per month | 3 months |
| 3rd instalment (15 Dec) — paid less than 75% | 1% per month | 3 months |
| 4th instalment (15 Mar) — paid less than 100% | 1% per month | 1 month |
Example: If you were supposed to pay ₹30,000 by 15 September but paid only ₹10,000, the shortfall is ₹20,000. Interest = ₹20,000 ├ù 1% ├ù 3 months = ₹600.
Section 234A — Late Filing of ITR
This is not specific to advance tax but related — if ITR is filed late, interest at 1% per month on outstanding tax is charged from the ITR due date onwards.
Common Mistakes in Advance Tax Payment
- Not accounting for freelance/side income: TDS from salary may not cover total liability. Calculate net tax position carefully.
- Forgetting capital gains: Stock market profits, property sale, MF redemptions — all increase tax liability mid-year.
- Wrong Assessment Year: Always select AY 2026-27 (not FY 2025-26) while making payment.
- Not saving challan: Challan details (BSR code, serial number, date) are required while filing ITR to get credit for advance tax paid.
- Ignoring dividend income: Since FY 2020-21, dividends are taxable in hands of recipient — must be included in advance tax estimate.
Advance Tax vs Self-Assessment Tax
| Feature | Advance Tax | Self-Assessment Tax |
|---|---|---|
| When paid | During the financial year (June, Sept, Dec, Mar) | Before filing ITR (after FY ends) |
| Challan type | ITNS 280, Type: 100 | ITNS 280, Type: 300 |
| Interest if not paid | Section 234C (deferral) | Section 234A (late filing) + 234B |
| Applies when | Tax > ₹10,000 for the year | Any remaining tax after TDS and advance tax |