Advance Tax Payment Under ITA 2025: Calculation, Due Dates and Interest on Default

Advance tax is income tax paid in instalments during the Tax Year rather than as a lump sum at year-end. Under ITA 2025, any taxpayer whose estimated tax liability for the Tax Year exceeds Rs. 10,000 (after TDS credit) must pay advance tax. This prevents large end-of-year tax payments and associated interest.

Who Must Pay Advance Tax?

• Individuals, HUFs, firms, LLPs, companies with estimated tax liability > Rs. 10,000
• Resident senior citizens (60+) are exempt from advance tax if they have no income from business/profession
• Presumptive taxation (44AD/44ADA) taxpayers: single instalment by 15 March

Advance Tax Instalment Schedule

Computation of Advance Tax

1. Estimate total income for the Tax Year
2. Compute tax at applicable rates (including surcharge + cess)
3. Deduct expected TDS for the year
4. = Net advance tax liability
5. Pay as per instalment schedule above

Interest for Short Payment / Default

Section 234B — Non/Short Payment of Advance Tax

If advance tax paid by 31 March is less than 90% of assessed tax, interest @ 1% per month applies on the shortfall from 1 April to date of actual payment. Calculated on rounded amount.

Section 234C — Deferment of Instalments

If any specific instalment is short-paid:

• For 15 June shortfall: 1% per month for 3 months on 15% of tax
• For 15 September shortfall: 1% per month for 3 months
• For 15 December shortfall: 1% per month for 3 months
• For 15 March shortfall: 1% per month for 1 month

Challan for Advance Tax

Advance tax is paid via ITNS 280 challan, selecting the appropriate tax year and code (100 = advance tax). Payment can be made online through the Income Tax e-filing portal or bank branches.

Advance Tax for Capital Gains and Windfalls

Capital gains arising after 15 December are required to be paid as a single instalment with the 15 March instalment — no penalty for treating them as single-instalment. VDA income, lottery income, and unexpected gains should be included in the remaining instalment.

Self-Assessment Tax

If any tax remains unpaid after 31 March (after advance tax and TDS), it becomes self-assessment tax, payable before filing ITR. Interest under 234A (late filing) and 234B applies.