Key Highlights
- Advance tax provisions under Sections 396–401, Income Tax Act, 2025
- Pay advance tax if estimated tax liability for the Tax Year exceeds ₹10,000
- Four instalments: 15 June (15%), 15 September (45%), 15 December (75%), 15 March (100%)
- Senior citizens (60+) with no business income are exempt from advance tax
- Interest for default: 1% per month under Sections 418 and 419
- Presumptive tax scheme taxpayers: pay entire advance tax in one instalment by 15 March
- Self-employed professionals: same 4-instalment schedule as salaried/business taxpayers
1. Overview
The Indian income tax system operates on a "pay as you earn" principle. Under this system, taxpayers do not wait until the end of the year and then pay the entire tax in one shot — instead, they estimate their income and pay tax in instalments throughout the year. This is called advance tax.
Under the Income Tax Act, 2025, advance tax provisions are consolidated under Sections 396 to 401. The concept is identical to the old Sections 207 to 211 of ITA 1961 — the due dates, percentages, and penalties remain the same.
2. Who Must Pay Advance Tax?
Under Section 396 of ITA 2025, advance tax is payable by every taxpayer whose estimated tax liability for the Tax Year is ₹10,000 or more. This includes:
- Salaried employees (if TDS on salary is insufficient to cover full tax — e.g., they have additional income from capital gains, interest, rent)
- Self-employed professionals (doctors, lawyers, CAs, consultants)
- Business owners
- Investors with capital gains or dividend income
- NRIs with Indian income above the exemption limit
3. Who Is Exempt from Advance Tax?
- Senior citizens (60 years+) who do not have income from business or profession — they are fully exempt under Section 396(2) of ITA 2025
- Salaried employees where employer's TDS covers the full tax — they have no additional advance tax obligation
- Taxpayers whose entire tax liability is less than ₹10,000 after TDS credit
4. Advance Tax Due Dates and Percentages
| Instalment | Due Date | Cumulative % of Tax to be Paid | % for Each Instalment |
|---|---|---|---|
| 1st Instalment | 15th June 2026 | 15% of estimated annual tax | 15% |
| 2nd Instalment | 15th September 2026 | 45% of estimated annual tax | 30% |
| 3rd Instalment | 15th December 2026 | 75% of estimated annual tax | 30% |
| 4th Instalment | 15th March 2027 | 100% of estimated annual tax | 25% |
5. Advance Tax for Presumptive Taxation Taxpayers
Taxpayers under the presumptive taxation scheme (Section 44AD / 44ADA equivalents under ITA 2025) have a simplified advance tax rule:
- They need to pay advance tax in only one instalment — by 15th March of the Tax Year
- The entire advance tax (100%) must be paid in this single instalment
- If less than 100% is paid by 15 March, interest applies on the shortfall from 15 March to the payment date
6. How to Calculate Advance Tax
- Estimate your total income from all sources for the Tax Year (salary, capital gains, business, other sources)
- Subtract applicable deductions (if old regime) or take standard deduction (new regime)
- Compute estimated tax on this income at applicable slab rates
- Deduct TDS already deducted or expected to be deducted during the year
- If balance tax > ₹10,000 → advance tax is payable
- Pay the appropriate percentage by each due date
7. Advance Tax Calculation Example
All examples below are illustrative only.
Priya is a salaried employee with gross salary ₹18 lakh and dividend income of ₹80,000. Her employer will deduct TDS of ₹1,80,000 on salary. She is in the new tax regime.
| Particulars | Amount (₹) |
|---|---|
| Estimated Tax on total income (₹18L salary after ₹75K deduction + ₹80K dividend = ₹17.05L) | 2,62,000 |
| Less: Expected TDS on salary | (1,80,000) |
| Balance Tax (Advance Tax Liability) | 82,000 |
| Since ₹82,000 > ₹10,000 → advance tax is payable | — |
| 1st instalment (15 June): 15% of ₹82,000 | 12,300 |
| 2nd instalment (15 Sep): 30% of ₹82,000 | 24,600 |
| 3rd instalment (15 Dec): 30% of ₹82,000 | 24,600 |
| 4th instalment (15 Mar): 25% of ₹82,000 | 20,500 |
8. How to Pay Advance Tax
- Visit the Income Tax e-Filing Portal: incometaxindia.gov.in
- Go to e-Pay Tax (formerly NSDL/OLTAS)
- Select Challan 280 — Income Tax (Other than Companies) or Corporate Tax
- Select Advance Tax (100) as the type of payment
- Enter PAN, Tax Year 2026-27, and bank details
- Complete payment via Net Banking, Debit Card, or RTGS/NEFT
- Save the challan receipt (BSR code, challan serial number) for ITR filing
9. Interest for Advance Tax Default
| Section | Default | Interest Rate | Period |
|---|---|---|---|
| Section 418 | Non-payment or underpayment of advance tax | 1% per month (simple interest) | From 1 April of Tax Year to date of assessment or payment |
| Section 419 | Deferment of each instalment (paid less than required %) | 1% per month | From instalment due date to next due date or actual payment |
Interest under Section 418 applies if advance tax paid is less than 90% of assessed tax. Interest under Section 419 applies if individual instalments are short of the required cumulative percentage.
10. Latest Updates
- Advance tax provisions now under Sections 396–401 of ITA 2025 (were Sections 207–211 of ITA 1961)
- Due dates and percentages unchanged — 15 June, 15 Sep, 15 Dec, 15 March
- Senior citizen exemption (no business income) continues under Section 396(2)
- Presumptive taxpayers: single 15 March instalment continues
11. Why TaxClue
Underestimating advance tax leads to interest charges that accumulate throughout the year. TaxClue helps you compute advance tax accurately, track instalment due dates, and ensure you are not paying interest unnecessarily. Contact us for advance tax planning and computation for Tax Year 2026-27.
12. Resources & Checklist
- ☐ Estimate total income for Tax Year 2026-27 in April 2026
- ☐ Calculate advance tax after TDS credit
- ☐ Pay first instalment by 15 June 2026
- ☐ Revise estimate each quarter if income changes
- ☐ Save all advance tax challans for ITR filing
13. Contact Us
Advance tax is mandatory for every taxpayer with tax liability above ₹10,000. Missing instalments attracts interest that reduces your refund or increases your tax cost. Contact us for advance tax computation and compliance.