The payment of income tax is required to be made on an estimated basis during the financial year itself. The legal provisions of payment of the advance tax are mandatory in case the tax payable is more than Rs. 10,000/- in a financial year. Non Payment of Advance tax may impose additional Interest on Income Tax at Time of Income Tax Return FIling
Advance tax is income tax paid in advance in quarterly instalments during the financial year. It applies to individuals, businesses, and professionals whose total tax liability exceeds ₹10,000 in a financial year.
Advance tax payment is a system under the Indian Income Tax Act where taxpayers pay their estimated income tax liability in instalments during the same financial year in which the income is earned — rather than paying the entire tax in a lump sum at the time of filing an Income Tax Return (ITR).
In simple terms, advance tax is the concept of pay as you earn. Instead of waiting until the end of the financial year to pay your taxes, you estimate your total income and pay tax in four prescribed instalments.
Advance tax applies to every taxpayer — individual, HUF, firm, company, or any other entity — whose estimated income tax liability for the year is ₹10,000 or more after accounting for TDS (Tax Deducted at Source).
This includes:
Senior citizens aged 60 years or above who do not have income from business or profession are exempt from paying advance tax under Section 207. They can pay all their taxes at the time of filing the ITR.
However, if a senior citizen has business or professional income, the exemption does not apply.
Advance tax must be paid in four instalments. Missing these due dates attracts interest under Sections 234B and 234C.
| Instalment | Due Date | Amount Payable (% of Total Tax Liability) |
|---|---|---|
1st Instalment | 15th June | 15% of estimated total tax |
2nd Instalment | 15th September | 45% of estimated total tax (cumulative) |
3rd Instalment | 15th December | 75% of estimated total tax (cumulative) |
4th Instalment | 15th March | 100% of estimated total tax (cumulative) |
For Taxpayers Under Presumptive Taxation Scheme (Section 44AD / 44ADA): Such taxpayers are required to pay the entire 100% advance tax in a single instalment by 15th March of the financial year.
Failure to pay advance tax on time or paying insufficient advance tax attracts interest under Sections 234B and 234C of the Income Tax Act.
Section 234B applies when a taxpayer:
Interest Rate: 1% per month (or part of a month) on the shortfall amount, calculated from 1st April of the assessment year until the date of actual Payment or assessment, whichever is earlier.
Section 234C applies when advance tax is paid, but the instalment amounts are less than the prescribed percentages by the respective due dates.
Interest Rate: 1% per month for a period of 3 months on the shortfall of each instalment (except the last instalment, for which interest is charged for 1 month).
| Default | Section | Interest |
|---|---|---|
Less than 90% of total tax paid by 31st March | 234B | 1% per month from April onwards |
Shortfall in 1st instalment (June) | 234C | 1% for 3 months |
Shortfall in 2nd instalment (September) | 234C | 1% for 3 months |
Shortfall in 3rd instalment (December) | 234C | 1% for 3 months |
Shortfall in 4th instalment (March) | 234C | 1% for 1 month |
Note: Interest under Sections 234B and 234C is computed while filing the ITR. The Income Tax Portal auto-calculates this when you enter your advance tax payment details. If you need help filing, our experts at setupfiling.in can assist — file your ITR here.
Calculating advance tax involves estimating your total income for the financial year and computing the tax payable. Here is a step-by-step process:
Add up all sources of expected income for the year — salary, business income, professional income, capital gains, rental income, interest income, and any other income.
Subtract applicable exemptions (such as HRA, LTA) and deductions under Chapter VI-A (such as Section 80C, 80D, 80CCD, etc.) from your total estimated income to arrive at your Net Taxable Income.
Apply the applicable income tax slab rates (under the New Tax Regime or Old Tax Regime, whichever you choose) to your net taxable income, including surcharge and health & education cess at 4%.
Subtract any TDS that has been or is expected to be deducted from your income (from salary, interest, rent, etc.).
If the remaining tax payable (after TDS) is ₹10,000 or more, you are required to pay advance tax.
Divide and pay the calculated tax according to the prescribed percentages by each due date.
The Income Tax Department makes it easy to pay advance tax online through the e-Pay Tax facility on the Income Tax Portal (www.incometax.gov.in). Here is how:
Step 1: Visit the official Income Tax E-Filing portal at https://www.incometax.gov.in.
Step 2: Navigate to e-Pay Tax under the “Quick Links” section on the homepage. You do not need to log in to pay tax.
Step 3: Enter your PAN (Permanent Account Number) and mobile number. Verify with the OTP received.
Step 4: Select “Income Tax” as the tax applicable, and choose Assessment Year 2026-27 (for FY 2025-26 payments).
Step 5: Under the “Type of Payment”, select “Advance Tax (100)”.
Step 6: Enter the tax amounts under the relevant heads — Basic Tax, Surcharge, Health & Education Cess, and any interest if applicable.
Step 7: Choose your preferred payment mode — Net Banking, Debit Card, RTGS/NEFT, or Payment Gateway.
Step 8: Complete the payment. Download and save the Challan 280 receipt (BSR Code and Challan Serial Number) for your records.
✅ Pro Tip from SetupFiling.in: Always save a copy of Challan 280 after each advance tax payment. These details are required when filing your ITR. Need help with ITR filing? File your Income Tax Return online with our experts →
At the end of the year, if the Income Tax Department finds out that you have paid more tax than you should have paid, then it will refund the excess amount. Taxpayers can claim refund by filling and submitting Form 30. They have to make the claim within a period of one year from the last year of the assessment year.
If you are accruing income in excess of Rs.10,000 will be required to pay advance tax.
In case you miss the deadline of paying your fourth installment on 15 March, you can make the payment by 31 March.
If the advance tax paid is more than the total tax liability, the extra amount will be refunded. If the advance amount is more than 10% of the tax liability, then an interest of 6% p.a. will be paid by the IT Department.
Yes, any tax paid till 31 March will be considered as Advance Tax payment.