Advance Tax in India: Who Has to Pay, What Each Instalment Is, and What Interest Costs

Quick answer

You must pay advance tax if your tax for the year, after subtracting the TDS and TCS on that income, comes to ₹10,000 or more — section 404 of the Income-tax Act, 2025. It is paid in four instalments, cumulatively 15%, 45%, 75% and 100%, by 15 June, 15 September, 15 December and 15 March. Paying short costs interest under sections 424 and 425.

The test is ₹10,000 of tax, not ₹10,000 of income

Section 404 of the Income-tax Act, 2025 states it in one sentence:

Advance tax shall be payable by the assessee during a Financial year, where the amount of such tax payable during that year, as computed under this Part, is ₹10000 or more.

Three phrases carry the weight. "As computed under this Part" measures the threshold on the advance tax figure the next section produces — not on income, and not on gross tax. A freelancer whose clients have already deducted enough can sit under it; a salaried employee with one large interest payout can sit over it. "₹10000 or more" is a floor, not an allowance: cross it and the whole amount becomes payable in instalments. And "during a Financial year" ties the obligation to the year the income arises, not the year you file.

For AY 2026-27 the provision is section 208 of the Income-tax Act, 1961, and the figure was the same ₹10,000 — the Income Tax Department confirms the threshold is unchanged from the old Act.

What you owe: the section 405 formula

A = B − C, where A is the advance tax payable during the financial year, B is the income-tax on the estimated income at the rates in force in that financial year, and C is the tax deductible or collectible at source during that year on the income taken into account in computing that estimate.

The difficulty is never the algebra. It is the order.

The step people get wrong

Subtracting TDS is the last thing most people think about and the first thing the statute does. The instalment percentages in section 408 apply to A — the figure after the subtraction — not to B.

Work the ladder off B and every instalment is too large by the TDS proportion, all year. The money is not lost; it returns as a refund. But it is working capital sitting with the government for up to eighteen months, and it is the single most common source of over-payment.

The mirror error

The opposite mistake is subtracting tax that will never be deducted. C is the tax deductible or collectible at source on the income taken into account in the estimate, so income carrying no deduction obligation sits in B with nothing to offset it. Both sides must describe the same income. Our TDS crosswalk has the rate and threshold for each deduction.

The four instalments, and why the percentages are cumulative

Section 408(1) sets out the ladder in a table.

Read the second column twice. 45% is not another 45% — it is 45% in total. The words "as reduced by" make the percentages cumulative, which is why someone who paid the full 15% in June pays 30% in September, not 45%. The same shape applied under the 1961 Act; only the citation moved. A missed instalment does not disappear either: it rolls forward, and the next date still demands the full cumulative figure.

Presumptive filers pay once, by 15 March

Section 408(2) takes an assessee declaring profits under section 58(2), Table serial number 1 or 3 out of the ladder entirely. They pay the whole amount on or before 15 March, in one instalment.

Serial number 1 is eligible business, with a ceiling of ₹2 crore of turnover (₹3 crore where cash receipts are 5% or less); serial number 3 is a specified profession, ceiling ₹50 lakh of gross receipts (₹75 lakh on the same cash test). The rule concentrates the entire year's tax on a single date.

A payment on 28 March still counts as advance tax

Section 408(3) is short and worth knowing by heart:

Any amount paid by way of advance tax on or before the 31st March, shall be treated as advance tax paid during the financial year ending on that day for all the purposes of this Act.

A payment made between 16 and 31 March is still advance tax. It is late for the 15 March instalment, so section 425 can bite, but it is not converted into self-assessment tax and it counts towards the 90% test in section 424. Realising on 27 March that you are short and paying that week beats paying in April.

Which Act governs which instalment

Two tax years are live at once, under two different statutes.

The Income-tax Act, 2025 came into force on 1 April 2026 — that is section 1(3); section 1(2) is only the extent clause, which says the Act extends to the whole of India. So the 2025 Act governs FY 2026-27, which is tax year 2026-27.

AY 2026-27 is the income of FY 2025-26 and remains governed by the Income-tax Act, 1961. Section 536(1) repealed the 1961 Act, but section 536(2)(c) keeps it applying to proceedings for any tax year beginning before 1 April 2026 — including proceedings initiated after that date.

One rule resolves the rest: advance tax follows the year of the income, not the date of payment.

The 15 March 2026 and 15 June 2026 instalments are three months apart and sit under different Acts. Nothing about the payment looks different; the citation on your working papers should. For the wider picture, see our guide to the Income-tax Act, 2025.

What it costs when you get it wrong

Two interest sections measure different things, and you can owe both.

Section 424 — the 90% test

Section 424, the successor to section 234B, applies where an assessee liable under section 404 has failed to pay advance tax, or has paid less than 90% of the assessed tax.

Simple interest runs at 1% for every month or part of a month, from 1 April following the tax year, up to the date of determination of total income under section 270(1) — and up to the date of completion of regular assessment where one is made. It is charged on the assessed tax where nothing was paid, and on the shortfall where the 90% test failed.

This is the expensive one: it does not start until the year is over, and it runs to the date of determination rather than of payment, so a late return lengthens it.

Section 425 — deferring an instalment

Section 425, the successor to section 234C, ignores the year as a whole. It asks, at each instalment date, whether the advance tax paid by then measured up against the tax due on the returned income.

The safe harbour in section 425(2)

No interest arises under section 425(1) if the advance tax paid on current income is 12% or more of the tax due on returned income by 15 June, or 36% or more by 15 September.

That is a three-percentage-point tolerance, and it exists because a June estimate made ten weeks into the year is a forecast. Note what it does not cover: December and March have no tolerance at all.

Section 425(3) — presumptive filers and the 15 March failure

Section 425(3) charges simple interest at 1% on the shortfall for a presumptive assessee under section 58(2), Table serial number 1 or 3, and for any assessee liable under section 404 who fails to pay, or pays less than the tax due on the returned income, by 15 March.

What "tax due on the returned income" means

Section 425(5) defines it, and the definition is more generous than it first looks: the tax on the total income declared in the return for the tax year, reduced by tax deductible or collectible at source under Chapter XIX-B on income taken into account, relief under section 157, relief under section 159(1) or section 159(2) for foreign tax, deduction under section 160, and tax credit set off under section 206(1)(m) to (p) and section 206(2)(e) to (h).

One caution we would rather state than paper over. Section 424 measures against assessed tax; section 425 measures against tax due on the returned income. They are different figures. We set out the section 425(5) definition because we read it; we are not restating a definition of "assessed tax", because we did not verify one.

Section 425(4): the exclusion that saves most people

This is the provision worth knowing before any other, because it turns the most alarming scenario in advance tax — a large one-off receipt late in the year — into a manageable one. Section 425(4) provides that no interest arises under section 425(1) or 425(3) on a shortfall caused by underestimating or failing to estimate:

1. capital gains;
2. income of the kind described in section 2(49)(n) — the winnings category;
3. profits and gains of business or profession accruing or arising for the first time; and
4. dividend income, which by section 425(6) takes its section 2(40) meaning but excludes sub-clause (e), deemed dividend.

The relief is conditional, and the condition is the point: the assessee must pay the full tax on that income in any of the remaining instalments, or by 31 March of the tax year.

Three scoping notes, because it is regularly overstated.

• It excuses the shortfall attributable to that income. The ordinary part of the ladder is still due on time.
• Sub-clause 3 says accruing or arising for the first time — for someone who started a business or practice during the year, not an established business having a good quarter.
• It says nothing about section 424. The 90% test still applies to the year as a whole. Use the exclusion to avoid section 425 interest, and pay by 31 March anyway so section 424 never starts.

Worked examples

Each example states its assumptions. None computes the tax itself — the rate applied to the income is a separate question, and the year's total tax is taken as a given so the instalment mechanics stay visible.

1. A consultant with client TDS — where the formula bites

Assumptions: resident individual; tax year 2026-27; professional income taxed on actual profits, not presumptive; estimated income-tax for the year at the rates in force of ₹3,20,000 (not computed here); tax expected to be deducted at source by clients of ₹1,20,000; no capital gains; no relief or tax credit claimed.

Section 405 first. B = ₹3,20,000. C = ₹1,20,000. A = ₹2,00,000 — the number the ladder runs on.

Run the same year off B instead and the instalments become ₹48,000, ₹96,000, ₹96,000 and ₹80,000: ₹3,20,000 of advance tax on top of ₹1,20,000 already withheld. ₹1,20,000 paid twice, recoverable only as a refund after the return is processed.

2. Two thousand rupees short in June

Assumptions: the same consultant; tax due on the returned income under section 425(5) is ₹2,00,000; they pay ₹22,000 on 15 June, ₹68,000 on 15 September, ₹60,000 on 15 December and ₹50,000 on 15 March; no income of the kinds listed in section 425(4).

• 15 June. The safe harbour is 12% of ₹2,00,000 = ₹24,000. They paid ₹22,000, missing it by ₹2,000. Interest is then computed against the 15% figure: ₹30,000 − ₹22,000 = ₹8,000 shortfall, at 3% = ₹240.
• 15 September. Cumulative ₹90,000, against a 36% harbour of ₹72,000 and a 45% requirement of ₹90,000. Both met. Nil.
• 15 December and 15 March. Cumulative ₹1,50,000 and ₹2,00,000, exactly meeting 75% and 100%. Nil.

Total section 425 interest: ₹240. Paying ₹24,000 in June instead of ₹22,000 would have made it nil — the harbour is a cliff, not a slope. A ₹6,000 shortfall in December, with no tolerance at all, costs 3% of ₹6,000 = ₹180.

3. A capital gain in December

Assumptions: resident individual; tax year 2026-27; before the gain, tax due on the returned income is ₹2,00,000 and the June and September instalments were paid exactly on the ladder (₹30,000 and ₹60,000, cumulative ₹90,000); a sale on 2 December 2026 adds ₹1,00,000 of tax, taking the year's figure to ₹3,00,000; nothing else changes.

Without a special provision the June and September requirements would be recalculated on ₹3,00,000: 15% = ₹45,000 against ₹30,000 paid, and 45% = ₹1,35,000 against ₹90,000 paid. That is 3% of ₹15,000 plus 3% of ₹45,000 — ₹1,800 on two dates that had passed before the gain existed.

Section 425(4)(i) removes it, provided the whole tax on that income is paid in a remaining instalment or by 31 March of the tax year. After 2 December 2026 those are 15 December 2026 and 15 March 2027.

• Pay the ₹1,00,000 with the December or the March instalment — or, having missed 15 March, by 31 March 2027, which section 408(3) still treats as advance tax. The exclusion holds, and nothing is charged under section 425 on the gain.
• Pay it on 3 April 2027: the condition fails, section 425 applies to the gain, and ₹2,00,000 of a ₹3,00,000 liability is under 90%, so section 424 runs at 1% a month from 1 April 2027 as well.

The ordinary ₹2,00,000 ladder still has to be met on its own dates. The exclusion covers the gain, not the year.

4. A presumptive professional who pays 80% on 15 March

Assumptions: resident individual in a specified profession, declaring under section 58(2), Table serial number 3; gross receipts of ₹40,00,000 for tax year 2026-27, within the ₹50 lakh ceiling; estimated income-tax for the year at the rates in force of ₹3,00,000 (not computed here); TDS deducted by clients of ₹1,50,000; they pay ₹1,20,000 on 15 March 2027; assessed tax later determined at ₹1,50,000, total income determined on 12 August 2027; months counted as complete months plus any part month, as section 424 directs.

Section 405: A = ₹3,00,000 − ₹1,50,000 = ₹1,50,000, due in full on or before 15 March 2027 under section 408(2). There is no June, September or December obligation.

• Section 425(3). Tax due on the returned income is ₹1,50,000; ₹1,20,000 was paid by 15 March; shortfall ₹30,000, at 1% = ₹300.
• Section 424. 90% of the assessed tax of ₹1,50,000 is ₹1,35,000, so the section applies to the ₹30,000 shortfall at 1% for every month or part of a month from 1 April 2027 to 12 August 2027 — four complete months and a part month, so 5% = ₹1,500.

A ₹30,000 shortfall costs ₹1,800, and it grows for as long as the return sits unprocessed.

Your advance tax calendar

For tax year 2026-27, under the Income-tax Act, 2025:

For AY 2026-27 the dates were 15 June 2025, 15 September 2025, 15 December 2025 and 15 March 2026, under the Income-tax Act, 1961.

Three reviews are usually enough: a forecast before 15 June, a hard look in early September once the first quarter's actuals exist, and a full reconciliation in the first week of March that sweeps up every one-off. The March review pays for itself, because 31 March is the last date on which anything can still be advance tax.

After that the position moves to the return. For AY 2026-27 a belated return runs to 31 December 2026, while a revised return under section 139(5), as substituted by the Finance Act, 2026, runs to the end of the assessment year — 31 March 2027. Those two dates are no longer the same, which is why a belated return can now be revised. Under the 2025 Act the equivalents are 9 and 12 months from the end of the tax year; the income tax return filing guide has the full table.

Common mistakes

• Running the percentages on the pre-TDS figure. Section 405 subtracts C first; everything downstream is computed on A.
• Treating 45% as an additional 45%. The table says "as reduced by the amount paid in the earlier instalment".
• Assuming the safe harbour applies all year. Section 425(2) covers 15 June and 15 September only.
• Reading section 425(4) as a general amnesty. It excuses only the shortfall attributable to the listed income, only if the tax on it is paid in a remaining instalment or by 31 March — and it does not touch section 424.
• Stopping on 16 March. Section 408(3) keeps the door open to 31 March, and section 424 runs to determination rather than to payment, so a late return lengthens the period charged.
• Labelling a March instalment with the wrong year. Put the year of the income on the challan.

Our advance tax payment service computes the estimate and the instalment each quarter; tax planning is for cases where the timing of income is itself the decision.

What this page does not cover

• The tax itself. Every example takes the year's income-tax as a given. Slabs, the regime choice and the rebate are a different question — see old vs new tax regime for business owners. We have not restated rates for FY 2026-27: those come from the Finance Act, 2026 and we have not verified them here.
• Capital gains rates and holding periods. Example 3 assumes a tax figure rather than computing one; capital gains ITR filing is the place to start.
• Which ITR form you file, and how. The income tax return filing guide, and for freelancers specifically.
• Sections 407 and 409. Section 407 lets an Assessing Officer require an estimate and order payment; section 409 deems a person an assessee in default for failing to comply, or to send the intimation. We name them; we have not traced the procedure, the time limits or the consequences, and will not describe them from memory.
• Any exemption that turns on who you are rather than what you owe. Section 404 sets an arithmetic test, and that is the only test this page states. Confirm any personal exemption in the Act for the tax year in question before skipping an instalment.
• The 1961 Act's own text. It is not reachable from the public statute repositories, so everything here about AY 2026-27 rests on the Department's guidance — which is why those rows carry section numbers, not quotations.

Sources and currency

Applies to: Tax year 2026-27 (income of FY 2026-27) and later, under the Income-tax Act, 2025 — the instalments falling on 15 June 2026 and after. For AY 2026-27 (income of FY 2025-26), including the instalment that fell due on 15 March 2026, the Income-tax Act, 1961 still governs.

Every threshold, percentage, interest rate and section number on this page was read from the Gazette of India text of the Income-tax Act, 2025 on 20 August 2026, and checked against the Income Tax Department's own Tax Payments guidance. The Income-tax Act, 1961 is not reachable from the public statute repositories, so the AY 2026-27 side of this page rests on the Department's guidance rather than on the bare Act, and that limitation is stated where it matters. Income-tax provisions change at each Finance Act; confirm the current position before relying on a figure for a payment.

• Income-tax Act, 2025 (No. 30 of 2025) — Gazette of India Extraordinary, 21 August 2025 (sections 404 to 409, 424 and 425)
• Finance Act, 2026 (No. 4 of 2026) — Gazette of India Extraordinary, 30 March 2026 (sections 2 and 3, the two charging sections; return due dates)
• Income Tax Department, e-filing portal — Tax Payments
• Income Tax Department, e-filing portal — Income Tax Returns