Advance tax is income tax paid during the financial year on estimated current-year income instead of waiting until return filing. In practice, it matters whenever TDS will not fully cover the year’s tax liability, which is common for business income, professional receipts, rent, capital gains, interest, and dividend income.
Change-sensitive note verified on 14 August 2026: the Income Tax Department portal states that for Tax Year 2026-27 onward, advance tax payments are governed by the Income Tax Act, 2025, while the basic framework, threshold, instalment pattern, and interest rates remain broadly unchanged from the earlier law.
Who needs to pay advance tax
Based on the Income Tax Department’s current guidance, advance tax becomes payable when the estimated tax payable for the year is Rs. 10,000 or more. For many individuals, salary TDS covers most liability, but the trigger appears when other income or under-deduction leaves a meaningful balance tax for the year.
Typical cases include:
- Businesses and professionals with tax payable beyond TDS or TCS credits
- Salaried individuals with substantial bank interest, rent, capital gains, or dividend income
- Freelancers and consultants with uneven receipts during the year
- Companies and firms estimating current-year taxable profits
Important exception
A resident senior citizen who does not have income from business or profession is not liable to pay advance tax, according to the Income Tax Department’s senior citizen guidance.
Current instalments and due dates
The Department’s current help material shows the standard advance-tax schedule as follows.
| Due date | Cumulative advance tax payable | What it means |
|---|---|---|
| On or before 15 June | 15% | First payment based on estimated annual tax |
| On or before 15 September | 45% | Total paid by this date should reach 45% |
| On or before 15 December | 75% | Total paid by this date should reach 75% |
| On or before 15 March | 100% | Entire estimated advance tax should be paid |
The portal also states that taxpayers under the presumptive taxation scheme must generally discharge the entire advance-tax liability in one instalment on or before 15 March.
How advance tax is estimated in practice
- Estimate taxable income from all heads for the year.
- Apply the tax regime and rates relevant to that year.
- Reduce expected TDS, TCS, and reliefs or credits that are clearly available.
- If the remaining tax payable is Rs. 10,000 or more, compute the instalments on the cumulative percentages above.
- Revise the estimate during the year if income changes materially.
This is not a one-time calculation. Advance tax is an estimate, so the working should be updated when profits change, a property is let out, a gain is booked, or investment income rises.
Example 1: salaried taxpayer with extra interest income
Assumptions: An employee expects total tax for the year of Rs. 98,000. Employer TDS for the year is expected to be Rs. 80,000. No other tax credits are available.
Estimated tax still payable during the year = Rs. 18,000. Since this exceeds Rs. 10,000, advance tax applies.
| Due date | Cumulative percentage | Cumulative tax required | Payment due at that stage |
|---|---|---|---|
| 15 June | 15% | Rs. 2,700 | Rs. 2,700 |
| 15 September | 45% | Rs. 8,100 | Rs. 5,400 more |
| 15 December | 75% | Rs. 13,500 | Rs. 5,400 more |
| 15 March | 100% | Rs. 18,000 | Rs. 4,500 more |
If the employee later earns additional interest or realises capital gains, the remaining instalments should be recomputed using the updated estimate.
Example 2: resident senior citizen without business income
Assumptions: A resident individual aged 67 earns pension and bank interest only. Total tax for the year, after deductions, is Rs. 22,000. There is no business or professional income.
Even though the estimated tax exceeds Rs. 10,000, the Department’s published exception says a resident senior citizen without business or professional income is not liable to pay advance tax. The tax can therefore be settled through TDS, self-assessment tax, or both, depending on the facts.
Advance tax, TDS, and self-assessment tax are not the same thing
| Item | When it is paid | Who usually pays it | Why it matters |
|---|---|---|---|
| Advance tax | During the financial year | Taxpayer | Prevents year-end shortfall and interest exposure |
| TDS | At payment or credit, as applicable | Payer or deductor | Reduces the tax the recipient may still need to pay |
| Self-assessment tax | Before filing the return if tax is still due | Taxpayer | Clears the final balance after adjusting taxes already paid |
A common error is to check only gross income and ignore TDS. The better approach is to estimate the remaining tax payable after expected credits.
Interest basics for shortfall or delay
The current portal FAQ states that the interest rates for advance-tax defaults remain unchanged in substance:
- Default in payment of advance tax: 1% per month or part of a month where the required condition for payment is not met or advance tax paid is below the prescribed benchmark of assessed tax
- Deferment of instalments: 1% or 3% for the specified periods under the law, depending on the nature of the shortfall
For day-to-day work, the practical takeaway is simple: late payment and underestimation both cost money. A revised estimate before each instalment is often more valuable than a perfect first estimate in June.
How to pay advance tax on the Income Tax portal
The Department’s e-Pay Tax guidance shows that payment can be made through the portal in pre-login or post-login mode by creating a challan, selecting the relevant tax-payment category, and choosing Advance Tax as the payment type. The current portal also supports online modes such as net banking, debit card, payment gateway options, and certain offline bank-counter workflows.
For current-period payments, pay attention to the portal’s distinction between older periods governed by the 1961 law and Tax Year 2026-27 onward governed by the 2025 law, because the challan flow and period selection now use that split.
A practical checklist before each instalment
- Update current-year revenue, salary, rent, interest, dividend, and capital-gain figures
- Confirm which tax regime is being applied for the year
- Check TDS and TCS already reflected or reasonably expected
- Recalculate the remaining tax payable, not just total tax
- Compare tax paid so far with the cumulative instalment target
- Retain challan details for return preparation and tax reconciliation
Where professionals usually add value
Advance tax is straightforward when income is stable, but it becomes judgment-heavy when profits fluctuate, gains are booked late in the year, or the taxpayer moves between salary, consulting, and investment income. In those cases, the useful professional work is not merely computing percentages; it is building a defendable estimate, updating it on time, and documenting the assumptions behind each payment.
