Advance Tax in India: Who Must Pay and How to Calculate It

Most salaried employees never think about advance tax because their employer deducts TDS every month and the tax is paid in full by the time the salary lands in the bank account. But if you have income from freelancing, rental property, capital gains, or interest, your tax liability may exceed what TDS covers — and the Income Tax Act 2025 requires you to pay advance tax on your own.

When does advance tax apply?

Under Section 207 of the Income Tax Act 2025, advance tax is payable if your estimated tax liability for the financial year (after TDS) exceeds ₹10,000. This applies to all resident individuals, HUFs, and companies.

You do NOT need to pay advance tax if:

You are a resident senior citizen (age 60 or above) with no business or profession income
Your only income is from salary (TDS already covers it)
Your estimated tax after TDS is ₹10,000 or less

You MUST pay advance tax if:

You are a freelancer with income not subject to TDS
You earn rental income (TDS may be 30% on rent but your total tax may exceed it)
You have capital gains in a year (LTCG or STCG)
You have interest income that is not fully taxed at source
You have a pension or other income where TDS is insufficient

Advance tax instalment schedule for FY 2026-27

The due dates and the percentage of estimated annual tax payable are:

Instalment	Due date	% of advance tax to be paid
First	15 June 2026	At least 15% of annual tax
Second	15 September 2026	At least 45% of annual tax
Third	15 December 2026	At least 75% of annual tax
Fourth	15 March 2027	100% of annual tax

You can pay more than the minimum in any instalment. If your income is bunched (for example, you receive a large capital gain in December), paying a larger chunk in the December or March instalment is acceptable as long as the total paid equals your actual liability when you file.

How to estimate your advance tax

Step 1: Estimate annual income

Add up all expected income for FY 2026-27:

Salary (after standard deduction of ₹75,000)
Rental income (after 30% deduction under Section 24)
Business or professional income (after expenses)
Capital gains (short-term at slab rate; long-term at 12.5% for equity, 20% for property)
Interest income (added to your slab)
Any other income

Step 2: Calculate gross tax

Apply the slab rates from Section 202 of the Income Tax Act 2025 (new regime) or the old regime slabs, whichever applies to you.

Step 3: Subtract TDS and chapter VI-A deductions

Deduct TDS deducted by employers, banks, and tenants. Then deduct deductions under Chapter VI-A (80C, 80D, 80CCD, etc., if you are in the old regime).

Step 4: Apply rebate and cess

Apply Section 87A rebate if applicable. Add 4% health and education cess.

Step 5: Check against ₹10,000

If the result is more than ₹10,000, advance tax is required.

Worked example: freelancer in Mumbai

Priya is a freelance graphic designer in Mumbai. Her income varies month to month. For FY 2026-27 she estimates:

Freelance fees: ₹18,00,000
Business expenses: ₹6,00,000
Net business income: ₹12,00,000
No other income
No TDS deducted

Step 1: Net income = ₹12,00,000 Step 2: Tax under new regime (no deductions available):

nil on first ₹4,00,000
5% on ₹4,00,000 = ₹20,000
10% on ₹4,00,000 = ₹40,000
Total tax = ₹60,000 Step 3: Less: no TDS → Tax liability = ₹60,000 Step 4: Add cess: ₹60,000 × 4% = ₹2,400 Step 5: Total tax = ₹62,400

Since ₹62,400 > ₹10,000, Priya must pay advance tax.

Instalment schedule:

By 15 June 2026: at least 15% of ₹62,400 = ₹9,360
By 15 September 2026: at least 45% = ₹28,080 (cumulative)
By 15 December 2026: at least 75% = ₹46,800 (cumulative)
By 15 March 2027: 100% = ₹62,400 (cumulative)

Interest for late payment

If you miss an instalment or underpay, Section 234B and 234C of the Income Tax Act 2025 charge simple interest at 1% per month on the shortfall. This interest is not minor — three months of missed payment on a ₹60,000 tax bill costs ₹1,800 in interest alone. Pay on time.

How to pay advance tax

Advance tax is paid through the Income Tax Department’s e-filing portal (e-pay Tax) or through net banking at authorised banks. The challan is ITNS 280 with tax type “Advance Tax”.

Sources

Income Tax Act 2025, Section 207 — liability to pay advance tax (verified 7 October 2026).
Advance tax — Income Tax Department e-filing portal (verified 7 October 2026).
Interest for default — Section 234B and 234C, Income Tax Act 2025 (verified 7 October 2026).

New income tax regime slabs FY 2026-27 — slab rates to calculate your advance tax base
Income Tax Calculator — estimate your annual tax liability — enter your freelance income to see if advance tax applies