Who has to pay advance tax
Advance tax is income tax paid during the year instead of at filing time. Section 208 makes it compulsory for anyone whose tax liability for the year, after subtracting TDS and TCS, is ₹10,000 or more. That covers freelancers and consultants, F&O and intraday traders, landlords, people with large interest or dividend income, anyone who booked capital gains, and salaried employees whose side income is not covered by the employer's TDS.
Resident senior citizens (60 and above) with no business or professional income are exempt, even if their pension and interest income is large. Everyone else must estimate income for the full year, compute the tax under their chosen regime, subtract expected TDS, and pay the balance in four instalments.
Advance tax due dates and instalments for FY 2025-26
- Taxpayers under presumptive schemes 44AD (business) and 44ADA (profession) pay the entire amount in one instalment by 15 March.
- Tax paid by 31 March still counts as advance tax for the year, but interest under 234C runs for the March instalment.
- If the 15th is a bank holiday, payment on the next working day is accepted.
- Pay online through the e-Filing portal (e-Pay Tax) using challan 280, minor head 100 (advance tax), assessment year 2026-27.
| Due date | Cumulative tax to be paid | Instalment share |
|---|---|---|
| 15 June 2025 | 15% of total advance tax | 15% |
| 15 September 2025 | 45% | 30% |
| 15 December 2025 | 75% | 30% |
| 15 March 2026 | 100% | 25% |
Worked example: F&O trader with ₹15 lakh profit
Suppose you expect ₹15,00,000 of F&O and business profit plus ₹50,000 of interest in FY 2025-26, choose the new regime and have no TDS. There is no standard deduction because there is no salary, so taxable income is ₹15,50,000. Tax = ₹20,000 (5% slab) + ₹40,000 (10% slab) + ₹52,500 (15% on ₹3,50,000) = ₹1,12,500, plus 4% cess ₹4,500 = ₹1,17,000.
The instalments are: ₹17,550 by 15 June (15%), a further ₹35,100 by 15 September (cumulative ₹52,650), ₹35,100 more by 15 December (cumulative ₹87,750) and the final ₹29,250 by 15 March. If profits turn out higher or lower during the year, revise the estimate and adjust the remaining instalments; the law expects a reasonable estimate, not a perfect one.
If the same trader opted for section 44AD and declared 6% of a ₹2 crore digital turnover (₹12,00,000), the tax after the 87A rebate would be nil, and even if it were not, the whole amount could be paid by 15 March.
Interest under section 234C for late or short instalments
Section 234C charges simple interest at 1% per month on any shortfall in an instalment, for three months on the June, September and December instalments and one month on the March instalment. In the example above, skipping the June instalment entirely costs about ₹525 (₹17,500 × 1% × 3, after rounding the shortfall down to the nearest hundred). Missing all four would cost roughly ₹4,400.
Two safe harbours soften the first instalments: no interest is charged for June if at least 12% of the total has been paid, and none for September if at least 36% has been paid. Interest is also not charged on the shortfall caused by capital gains, lottery winnings or new business income that arose after an instalment date, provided the tax on that income is paid in the next instalment.
Section 234B is separate: if less than 90% of the total tax is paid as advance tax by 31 March, interest of 1% per month runs from 1 April until the return is filed and the balance paid. Together, 234B and 234C can add 6 to 10% to a bill that is paid a year late.
Salaried employees: when TDS is not enough
Your employer deducts TDS only on salary, so tax on bank interest, rent, dividends, capital gains or freelance income must be paid separately once the shortfall crosses ₹10,000. The simplest route is to declare the other income to your employer in Form 12BB so it is added to the TDS; otherwise pay advance tax yourself on the schedule above. A common surprise is equity gains booked in March, on which the tax is due by 15 March if the sale happened before, or with the return (with 234B interest only if the total shortfall exceeds 10%) if the sale came later.
How to estimate income by head
- Salary: gross salary for the year from your latest payslip times 12, adjusted for expected increments and bonus; TDS from the payslip counts against the tax.
- Business or profession: expected net profit after expenses; for presumptive schemes, 6% or 8% of turnover (44AD) or 50% of receipts (44ADA).
- Capital gains: gains booked so far plus any planned sales; use the capital gains calculator for special-rate tax and add it here.
- Other sources: interest on FDs and savings, dividends, and rent after the 30% standard deduction and municipal taxes.
- Deductions: 80C, 80D and others are available only in the old regime; the new regime allows the standard deduction (salary) and employer NPS.
- Reduce the total by TDS and TCS actually expected, including TDS on interest, dividends and rent, not just salary.
Refunds, revisions and paying after the year ends
Paying too much advance tax is not wasted: the excess is refunded after the return is processed, with 0.5% per month interest under section 244A from 1 April. Paying too little is fixed by paying self-assessment tax (challan 280, minor head 300) before filing, together with 234B and 234C interest calculated in the ITR utility. Keep the challan receipts and check that each payment appears in Form 26AS or AIS under the right assessment year before you file, since a wrong year is the most common reason for advance tax credit going missing.