Handling taxes at the end of the financial year can be overwhelming, especially when a large amount becomes payable at once. To make this process smoother, the Income Tax system requires certain taxpayers to pay advance tax in phases during the year itself.
This approach not only spreads out the tax burden but also promotes better financial discipline and timely compliance.
What is Advance Tax?
Advance tax is the payment of income tax in installments based on your estimated annual income, instead of paying the entire amount at year-end.
It typically applies when your income includes sources beyond salary, such as:
- Interest from bank deposits or investments
- Capital gains from sale of shares or property
- Rental income
- Business or professional earnings
- Income from lottery or similar sources
Who is Liable to Pay Advance Tax?
- Individuals, Freelancers & Businesses
If your total tax liability during the financial year is ₹10,000 or more, advance tax becomes applicable. This rule covers all categories of taxpayers.
- Senior Citizens
Individuals aged 60 years or above are exempt from advance tax, provided they do not have income from business or profession. If such income exists, the exemption does not apply.
- Presumptive Taxation (Sections 44AD & 44ADA)
Taxpayers under these schemes are required to pay the entire advance tax amount in one installment on or before 15th March.
- Presumptive Scheme under Section 44AE
Taxpayers falling under this section must follow the regular installment schedule applicable to other taxpayers.
Advance Tax Due Dates (FY 2025–26)
| Due Date | Payment Requirement |
| On or before 15 June | 15% of total tax liability |
| On or before 15 September | 45% (after adjusting earlier payments) |
| On or before 15 December | 75% (after adjusting earlier payments) |
| On or before 15 March | 100% (after adjusting earlier payments) |
For taxpayers under presumptive taxation (Sections 44AD & 44ADA), the full amount is payable by 15 March.
How to Pay Advance Tax
Online Method
Step 1: Visit the Income Tax e-filing portal
Step 2: Click on “e-Pay Tax”
Step 3: Enter your PAN and verify via OTP
Step 4: Select “Advance Tax (Challan 100)”
Step 5: Fill in tax details and complete the payment
Step 6: Download and retain the payment receipt
Offline Method
Step 1: Fill Challan ITNS 280
Step 2: Submit it at an authorized bank branch
Step 3: Collect the stamped challan as proof of payment
Interest on Delay or Short Payment
Non-payment or incorrect payment of advance tax may lead to interest under the Income Tax Act:
- Section 234B: If at least 90% of total tax is not paid by year-end
- Section 234C: If there is a delay or shortfall in installments
Interest Rate: 1% per month on the outstanding amount
How to Calculate Advance Tax
To calculate your liability:
- Estimate total income from all sources
- Deduct eligible deductions (e.g., Section 80C, 80D)
- Determine taxable income
- Apply applicable tax slab rates
- Add surcharge and cess, if applicable
- Reduce TDS already deducted
- If the remaining tax exceeds ₹10,000, advance tax is payable
Illustrative Example
Consider a taxpayer earning:
- ₹10,00,000 from professional services
- ₹50,000 as interest income
After claiming deductions of ₹1,50,000, taxable income becomes ₹9,00,000. The total tax liability (including cess) is ₹85,800. After adjusting TDS of ₹20,000, the net tax payable is ₹65,800.
Since the liability exceeds ₹10,000, advance tax is payable as follows:
| Due Date | Amount Payable |
| June | ₹9,870 |
| September | ₹19,740 |
| December | ₹19,740 |
| March | ₹16,450 |
Conclusion
Advance tax is a practical mechanism that helps taxpayers manage their obligations efficiently throughout the year. By paying taxes in installments, you avoid last-minute financial pressure, reduce exposure to interest penalties, and maintain better control over your finances.
A well-planned approach to advance tax ensures smoother compliance and reflects disciplined financial management.
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Disclaimer
This article is for general informational purposes only and does not constitute professional advice. Income Tax Laws are subject to changes, and interpretations may vary.
Readers are advised to consult a qualified professional before making any decisions.