Advance tax is income tax paid during the year in which the income is earned, instead of in one lump sum when the return is filed. From tax year 2026-27, it is governed by the Income-tax Act, 2025: the Income Tax Department's tax payments FAQ confirms that income earned during financial year 2026-27 is taxed under the 2025 Act and that the first instalment for that year was due on 15 June 2026. The Department also notes there is no policy change from the 1961 Act; the provisions have been reorganised with clearer computation formulas.
This guide explains who must pay, how to calculate each instalment after TDS, the special rule for presumptive taxpayers, how interest works under sections 424 and 425, and worked examples for a professional, a salaried person with other income and a late payer.
Who must pay advance tax
Under section 404 of the 2025 Act, advance tax is payable if the tax payable for the year, computed under the advance tax provisions, is ₹10,000 or more. The Department's FAQs on advance tax put it in practical terms: every person, whether an individual, firm or company, whose estimated tax liability for the year after TDS is ₹10,000 or more must pay tax for the year in advance during the same year.
Two groups are outside the net:
- Resident senior citizens (aged 60 or above during the tax year) who have no income from business or profession are not liable to pay advance tax.
- Individuals having only salary income are not required to pay advance tax, because the employer's TDS covers the tax.
The practical test is not whether you earn a salary but whether tax remains after TDS and TCS. A salaried person with interest, rent, capital gains or freelance income can easily cross ₹10,000 of net liability.
Instalment dates and percentages
Section 408 of the Income-tax Act, 2025 sets the schedule. For most assessees, section 408(1) requires four instalments, each a cumulative minimum reduced by what has already been paid:
| Due date | Cumulative advance tax to be paid |
|---|---|
| On or before 15 June | Not less than 15% |
| On or before 15 September | Not less than 45%, less the June payment |
| On or before 15 December | Not less than 75%, less earlier payments |
| On or before 15 March | 100%, less earlier payments |
The percentages are cumulative targets, not four amounts to add together. Under section 408(3), any amount paid on or before 31 March is treated as advance tax paid during that financial year.
Presumptive taxpayers pay once
Under section 408(2), an assessee declaring profits under the presumptive scheme of section 58(2) (Table serial numbers 1 or 3) must pay the whole advance tax on or before 15 March. This single-instalment rule applies only to those who actually opt for that scheme. A small business or professional who computes income on regular books follows the four-instalment schedule.
Capital gains and income that arises later
The FAQs state that if capital gains or casual income arise after the due date of an instalment, the tax on that income is paid in the remaining instalments. Section 425 also removes interest on a shortfall that relates to capital gains, income arising for the first time, dividend income and certain other income, provided tax on it is paid in the remaining instalments or by 31 March.
How to calculate advance tax
- Estimate total income for the tax year: salary, business or professional income, interest, rent, capital gains and other income.
- Compute tax under the regime you will use, including surcharge and cess where applicable.
- Reduce expected TDS, TCS and eligible reliefs. Advance tax is paid on the net figure, not the gross tax.
- Check the ₹10,000 threshold and the exemptions above.
- Apply the cumulative percentage for the next due date and subtract what you have already paid.
- Re-estimate before every due date. A large receipt, a bonus or a sale of shares should change the next instalment.
Worked example 1: a professional with TDS
A professional estimates total tax for tax year 2026-27 at ₹2,40,000 and expects clients to deduct ₹80,000 as TDS. Net advance tax is ₹1,60,000.
| Due date | Cumulative % | Cumulative target (₹) | Pay by this date (₹) |
|---|---|---|---|
| 15 June 2026 | 15% | 24,000 | 24,000 |
| 15 September 2026 | 45% | 72,000 | 48,000 |
| 15 December 2026 | 75% | 1,20,000 | 48,000 |
| 15 March 2027 | 100% | 1,60,000 | 40,000 |
In October a large assignment raises the net liability estimate to ₹2,20,000. The December target is recalculated on the new figure: 75% of ₹2,20,000 is ₹1,65,000. With ₹72,000 already paid, the December payment becomes ₹93,000, and the March payment is the remaining ₹55,000. Carrying on with the old schedule would leave a shortfall in December.
Worked example 2: a salaried person with rent and interest
Salary TDS fully covers the tax on salary, but the person also earns rent and fixed-deposit interest. After bank TDS on the interest, the additional tax for the year is estimated at ₹36,000. As this is above ₹10,000, advance tax applies: ₹5,400 by 15 June, a cumulative ₹16,200 by 15 September, ₹27,000 by 15 December and ₹36,000 by 15 March.
What happens if you pay late or too little
The 2025 Act has two separate interest provisions, both at 1% per month or part of a month. The Department's tax payments FAQ confirms that section 424 covers failure to pay advance tax and section 425 covers deferment of instalments, and its interest and fees guidance maps them to the old sections 234B and 234C.
| Provision | Old equivalent | Triggered when | Interest |
|---|---|---|---|
| Section 424 | Section 234B | Advance tax paid is less than 90% of the assessed tax | 1% per month on the unpaid tax, from 1 April after the tax year |
| Section 425 | Section 234C | An instalment falls short of the 15%, 45%, 75% or 100% target | 1% per month on the shortfall: for 3 months on the June, September and December shortfalls, and 1 month on the March shortfall |
Under section 425, an assessee under the section 58(2) presumptive scheme is charged simple interest at 1% where the single 15 March instalment falls short.
Worked example 3: interest on missed instalments
Take the professional from example 1 with net tax of ₹1,60,000, but assume nothing was paid in June or September, ₹1,20,000 was paid by 15 December and the balance by 15 March.
- June shortfall: ₹24,000 x 1% x 3 months = ₹720.
- September shortfall: ₹72,000 x 1% x 3 months = ₹2,160.
- December and March: targets met, no interest.
Interest under section 425 is ₹2,880. Now assume instead that only ₹1,20,000 was paid in the whole year, which is 75% of the ₹1,60,000 assessed tax and below the 90% mark. Section 424 then applies to the unpaid ₹40,000. If that balance is paid with the return in July 2027, interest runs for April, May, June and July: ₹40,000 x 1% x 4 months = ₹1,600, in addition to section 425 interest on the March shortfall (₹40,000 x 1% x 1 month = ₹400).
Advance tax and self-assessment tax
Advance tax is paid during the year on estimated income. Self-assessment tax is the balance paid after the year ends, before filing the return, once the final computation is ready. Paying the balance as self-assessment tax clears the tax, but it does not cancel interest under sections 424 and 425 that has already built up. Reconcile TDS, TCS and every advance tax challan with the tax credit statement before filing.
Common mistakes
- Calculating advance tax on gross tax without deducting expected TDS and TCS.
- Treating 15%, 45%, 75% and 100% as separate payments instead of cumulative targets.
- Ignoring interest, rent or capital gains because salary TDS is already deducted.
- Not revising the estimate after a large receipt during the year.
- Using the single 15 March date without having opted for the section 58(2) presumptive scheme.
- Assuming a senior citizen with business income is exempt; the exemption needs no business or professional income.
Advance tax checklist before each due date
- Update the income forecast, including one-off receipts.
- Recompute tax and net off expected TDS and TCS.
- Apply the cumulative percentage and subtract payments made.
- Pay by the due date and keep the challan; payments by 31 March still count as advance tax for the year.
- Match challans to the tax credit statement before filing the return.
Updated on 27 September 2026: merged three duplicate advance tax guides into this page, retitled, and updated it for the Income-tax Act, 2025 with sections 404, 408, 424 and 425, the ₹10,000 threshold, the senior citizen and salary-only exemptions, the section 58(2) single-instalment rule and worked interest examples, verified against Income Tax Department sources.
