What is Advance Tax?#
Advance Tax is income tax paid in advance — in installments during the financial year itself — rather than as a lump sum when filing your return. The idea is that if you'll owe significant tax at year-end, you should pay it progressively throughout the year.
Who Needs to Pay Advance Tax?#
You must pay advance tax if your estimated tax liability for the year exceeds ₹10,000 after accounting for TDS.
This commonly affects:
- Freelancers and consultants (no employer TDS)
- Business owners (variable income)
- Investors with capital gains, dividends, or rental income
- Salaried employees with significant side income (freelance, FD interest, gains)
Salaried employees whose only income is salary (where full TDS is deducted by employer) typically do NOT need to pay advance tax separately.
Advance Tax Due Dates#
| Installment | Due Date | Cumulative % of Tax |
|---|---|---|
| 1st Installment | June 15 | 15% |
| 2nd Installment | September 15 | 45% |
| 3rd Installment | December 15 | 75% |
| 4th Installment | March 15 | 100% |
For presumptive taxation cases (44AD / 44ADA): 100% advance tax due by March 15 (only one installment).
How to Calculate Advance Tax#
- Estimate your total income for the year (salary + freelance + capital gains + interest)
- Compute tax on estimated income at applicable rates
- Subtract TDS already deducted or expected to be deducted
- If balance > ₹10,000 → pay as advance tax in installments
Example:
- Estimated income: ₹12 lakh
- Tax (new regime): ₹90,000
- TDS from salary: ₹60,000
- Balance: ₹30,000 → Pay as advance tax
How to Pay Advance Tax#
- Go to incometax.gov.in → e-Pay Tax
- Select Challan 280 (Income Tax on Companies/Other than Companies)
- Select "Advance Tax" (100)
- Enter Assessment Year, PAN, and amount
- Complete payment via net banking/UPI/debit card
Penalty for Non-Payment / Short Payment#
If advance tax is not paid or is insufficient:
- Section 234B: Interest at 1% per month on unpaid tax if advance tax paid is < 90% of total tax
- Section 234C: Interest at 1% per month on shortfall in each installment
Example: If you owed ₹50,000 in advance tax but paid nothing, and you file in July — you could owe interest for 4 months (March to July) at 1% = ₹2,000+.