Advance Tax Payment

Advance tax is the 'pay-as-you-earn' system: if your total tax liability for the year (after TDS) crosses the prescribed threshold, you must pay it in instalments during the year — broadly by 15 June, 15 September, 15 December and 15 March — rather than all at once when you file. The threshold is ₹10,000 (section 404 of the Income-tax Act, 2025; section 208 of the 1961 Act for AY 2026-27), and the Income Tax Department confirms it is unchanged between the two Acts.

The instalment percentages are cumulative, not incremental: not less than 15% by 15 June, 45% by 15 September, 75% by 15 December, and the whole amount by 15 March (section 408(1)). If you paid nothing in June, the September instalment is the full 45%. Anything paid on or before 31 March still counts as advance tax for the year under section 408(3) — it is simply late for the 15 March instalment.

The single most common error is computing the instalments on the wrong base. Section 405 states it as A = B − C, where B is tax on your estimated income at the rates in force and C is the tax deductible or collectible at source on income already counted in that estimate. TDS comes out first, then the percentages apply to what is left. Skip that subtraction and you overpay all year; forget that TDS will not cover a one-off gain and you underpay and take interest. If you also deduct tax yourself, the quarterly TDS return is a separate obligation with its own calendar.

It applies to anyone with income beyond what's fully covered by TDS — business income, capital gains, interest, rent and more. Paying short or late attracts interest: section 424 (the successor to 234B) charges 1% a month where nothing was paid or where advance tax fell below 90% of assessed tax, running from 1 April following the year; section 425 (the successor to 234C) charges 3% on each of the June, September and December shortfalls and 1% on the March shortfall. A taxpayer declaring presumptive income under section 58(2) pays the whole amount in one instalment by 15 March (section 408(2)).

Two reliefs are worth knowing because they are routinely missed. Section 425(2) builds in a tolerance: pay 12% or more by 15 June, or 36% or more by 15 September, and no deferment interest arises for that instalment even though the stated targets are 15% and 45%. Section 425(4) removes deferment interest altogether on a shortfall caused by underestimating capital gains, winnings, dividend income, or business or professional income arising for the first time — provided you pay the tax on that income in one of the remaining instalments, or by 31 March of the tax year. That is the rule that makes an unexpected share sale in February manageable rather than punitive.

Worked example — a consultant's four instalments. Assumptions: resident individual, regular (non-presumptive) computation, estimated tax for the year after rebate and cess of ₹1,80,000, and TDS expected on professional fees of ₹60,000. Advance tax payable is B − C = ₹1,80,000 − ₹60,000 = ₹1,20,000. The instalments are 15% = ₹18,000 by 15 June, 45% cumulative = ₹54,000 (so a further ₹36,000) by 15 September, 75% cumulative = ₹90,000 (a further ₹36,000) by 15 December, and 100% = ₹1,20,000 (the last ₹30,000) by 15 March. Under the section 425(2) safe harbour, paying ₹14,400 — 12% — by 15 June would still avoid deferment interest on the first instalment. Miss the June instalment entirely and the interest is 3% of ₹18,000, which is ₹540. Every figure moves with your actual income, which is why we re-estimate each quarter rather than fixing the plan in April.

We estimate your income, compute each instalment, and help you pay on time so you avoid interest.