How to Pay Advance Tax: Due Dates and Calculation Guide

## What You Will Learn

• Who must pay advance tax and when it is applicable
• Advance tax due dates and installment schedule
• How to calculate your advance tax liability
• Step-by-step process to pay advance tax online
• Consequences of not paying advance tax

## What Is Advance Tax? Advance tax is income tax paid in advance before the end of the financial year, based on your estimated income for the full year. Instead of paying all tax at the time of filing your ITR, you pay it in quarterly installments during the year. **Why Advance Tax Exists**: The government needs a steady flow of tax revenue throughout the year, not just after the financial year ends. By paying advance tax, you also avoid a large tax burden at the time of ITR filing. **Who Must Pay Advance Tax**: Advance tax is mandatory if your estimated tax liability for the year exceeds ₹10,000. This applies to: - Salaried individuals whose tax liability after TDS exceeds ₹10,000 - Self-employed individuals with income from business/profession - Individuals with rental income, capital gains, or other income not subject to TDS As per Section 208 of the Income Tax Act, 1961, every person whose estimated tax liability is ₹10,000 or more must pay advance tax. **Who Is Exempt from Advance Tax**: - Resident senior citizens (60 years or above) who do not have income from business or profession - You can still pay advance tax voluntarily if you choose ## Step 1: Understand the Advance Tax Installment Schedule Advance tax must be paid in four quarterly installments. Missing deadlines attracts interest. **Advance Tax Due Dates and Payment Slabs**: **Installment 1 — Due 15th June**: - 15% of total advance tax liability - Example: Total estimated tax = ₹1 lakh. Installment 1 = ₹15,000 **Installment 2 — Due 15th September**: - 45% of total advance tax liability minus Installment 1 already paid - Example: ₹1 lakh × 45% = ₹45,000. Minus ₹15,000 paid in June = ₹30,000 due in September **Installment 3 — Due 15th December**: - 75% of total advance tax liability minus installments 1 and 2 already paid - Example: ₹1 lakh × 75% = ₹75,000. Minus ₹45,000 paid = ₹30,000 due in December **Installment 4 — Due 15th March**: - 100% of total advance tax liability minus all previous installments - Example: ₹1 lakh - ₹45,000 (paid) = ₹55,000 due in March **Important**: If you fail to pay an installment on time, interest under Section 234B and 234C applies. However, if you pay the full tax before 15th March, no interest applies for the 4th installment. ## Step 2: Calculate Your Estimated Advance Tax Liability Estimate your total income and tax liability for the year to determine how much advance tax to pay. **Step-by-Step Calculation**: **Step 1 — Estimate Annual Income**: - Salary income (annual gross salary) - Rental income (after 30% standard deduction) - Interest income (savings account, FD, bonds) - Capital gains (from stocks, mutual funds, property) - Business/profession income (for self-employed) **Step 2 — Calculate Gross Total Income** = Sum of all incomes **Step 3 — Apply Deductions**: - Section 80C (up to ₹1.5 lakhs) - Section 80D (health insurance) - Section 80CCD(1B) — NPS (₹50,000) - HRA exemption (if applicable) - Any other Chapter VI-A deductions **Step 4 — Net Taxable Income** = Gross Total Income - Deductions **Step 5 — Calculate Tax Liability** (based on applicable slab): - Old regime slabs or New regime slabs (choose whichever is beneficial) **Step 6 — Calculate Advance Tax** = Total tax minus TDS already deducted/paid - If TDS from salary, FD interest, etc. = ₹50,000 - If total tax = ₹80,000 - Advance tax liability = ₹80,000 - ₹50,000 = ₹30,000 ## Step 3: Pay Advance Tax Online The most convenient way to pay advance tax is through the Income Tax Department's e-payment portal. **Step-by-Step Advance Tax Payment**: **Step 1 — Go to Income Tax e-Payment Portal**: - Visit onlinesb.com or through net banking of authorized banks (SBI, HDFC, ICICI, etc.) - Alternatively: Visit incometax.gov.in → e-Pay Tax → Continue to e-Pay Taxes **Step 2 — Select Tax Payment Option**: - Choose "Advance Tax" (not "Self-Assessment Tax") - For self-employed with business income: "Advance Tax" **Step 3 — Enter Details**: - PAN (auto-populated if logged in) - Assessment Year: AY 2026-27 for FY 2025-26 - Type of Payment: "Advance Tax" - Address and Contact Details **Step 4 — Select Bank and Pay**: - Choose your bank (SBI, HDFC, ICICI, etc.) - Log in to net banking - Enter the advance tax amount - Confirm payment **Step 5 — Save the Challan**: - After payment, you receive a Challan Identification Number (CIN) - Save this CIN — it is your proof of payment - The CIN is also reflected in your Form 26AS ## Step 4: Adjust TDS and Advance Tax Together If you have TDS being deducted throughout the year (from salary, FD interest, etc.), your advance tax calculation must account for this. **How TDS Affects Advance Tax**: - TDS reduces your net tax liability - If TDS already paid exceeds ₹10,000 by March 15, no advance tax installments may be needed - However, if your income is uneven (e.g., you receive a large bonus in March), TDS may not be enough and advance tax becomes necessary **Example — Salary Earner with High Bonus**: - Monthly salary: ₹1 lakh (no TDS on monthly salary because total annual income is within ₹5 lakhs) - Bonus received in March: ₹20 lakhs (TDS deducted by employer) - Total tax liability: ₹3.5 lakhs - TDS already deducted: ₹2.8 lakhs (approx) - Advance tax due: ₹70,000 If this person did not pay advance tax, they owe ₹70,000 at the time of ITR filing. By paying advance tax in installments, they spread the cash outflow across the year. ## Step 5: Interest for Late or Non-Payment If you do not pay advance tax on time, the Income Tax Department levies interest. **Interest for Not Paying Advance Tax (Section 234B)**: - If advance tax paid is less than 90% of total tax liability, simple interest of 1% per month applies from the due date until the tax is paid - The interest is calculated on the shortfall amount - Example: You owe ₹1 lakh tax but paid only ₹80,000 in advance. Shortfall = ₹20,000. Interest at 1% per month for 6 months = ₹1,200 **Interest for Unequal Installment Payment (Section 234C)**: - If you pay the correct total advance tax but not in the correct installments, interest applies - For example, paying everything in the last installment when it should have been spread - Interest rate: 1% per month on the shortfall from each installment due date **How to Avoid Interest**: - Pay 90% or more of total tax liability by 15th March - Pay advance tax in the required quarterly installments - If unsure of income, overestimate tax slightly and pay more ## Common Mistakes to Avoid **Confusing Advance Tax with TDS**: TDS is deducted by your employer or bank when income is earned. Advance tax is paid by you based on your estimate of total annual tax. They are different payments — advance tax does not replace TDS. **Not Paying Because TDS Was Deducted**: Even if TDS is being deducted, if your total tax liability exceeds TDS, you may still need to pay advance tax. Calculate your estimated annual tax and TDS to determine if advance tax applies. **Paying Self-Assessment Tax Instead of Advance Tax**: If you pay after the financial year ends (e.g., in June after FY ends), it is self-assessment tax, not advance tax. Self-assessment tax paid after the year still attracts interest from the original due dates. **Missing the 15th March Final Installment**: The March 15th deadline for the final advance tax installment is strict. If you miss it, interest under Section 234B applies. Pay by March 15th to avoid any interest liability. ## Pros and Cons | Pros | Cons | |---|---| | Spreads tax cash outflow across the year | Requires estimating annual income in advance | | Avoids large lump-sum payment at ITR filing time | Interest charged for late or uneven payment | | Government receives steady tax revenue | Calculation can be complex for variable income | | Helps avoid interest under Sections 234B and 234C | Administrative process to track and pay quarterly | ## Frequently Asked Questions **Q1: I am a salaried employee — do I need to pay advance tax?** A: If your employer deducts TDS from your salary, you may not need to pay advance tax if your total tax liability is approximately equal to TDS. However, if you have other income (rental, freelance, capital gains) that has no TDS, and your total tax liability exceeds TDS by more than ₹10,000, you must pay advance tax. **Q2: Can I pay all my advance tax in the last installment (March)?** A: Technically yes — if your total advance tax paid by March 15th exceeds 90% of your total tax liability, no interest applies. However, if your calculation is wrong and 90% threshold is not met, interest under Section 234C applies for the earlier installment shortfalls. **Q3: What is the difference between advance tax and self-assessment tax?** A: Advance tax is paid during the financial year in quarterly installments based on your estimated income. Self-assessment tax is paid after the financial year ends when filing your ITR, to cover any shortfall between actual tax liability and TDS already paid. **Q4: I missed the June and September installments. Can I pay everything in December?** A: You can pay the December installment covering the cumulative amount, but interest under Section 234C applies for the June and September shortfalls. The interest is calculated at 1% per month on the shortfall amount for each month the earlier installments were not paid. **Q5: How do I know if my advance tax calculation is correct?** A: Use the Income Tax Department's advance tax calculator or FinWiz24's tax calculator. Estimate your annual income, apply deductions, calculate tax, subtract TDS already deducted, and divide the remainder across installments. If the total is less than ₹10,000, advance tax is not required. ## Related Guides

• How to File Income Tax Return Online: Step-by-Step ITR Guide
• Section 80C: Complete List of Investments and Exemptions
• Section 80D: How to Claim Maximum Health Insurance Deduction