If you’ve been getting confused about advance tax or wondering whether it applies to you, you’re not alone. Many taxpayers find themselves unsure about when they need to pay, how much, and what happens if they miss the deadlines.
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The reality is simpler than it seems. Advance tax is just paying your income tax in four installments throughout the year instead of one lump sum at the end. It’s designed to spread out your tax burden and help the government maintain steady revenue flow.
This guide will walk you through everything you need to know about advance tax in India—from who needs to pay it to how to calculate and make payments online. Whether you’re a salaried employee with additional income, a freelancer, or a business owner, you’ll find clear answers to help you stay compliant and avoid unnecessary penalties.
What exactly is advance tax?
Advance tax, also called “pay-as-you-earn” tax, means you pay your income tax in advance based on what you expect to earn during the financial year. Instead of waiting until March 31st and paying a huge amount, you spread it across four installments throughout the year.
The government introduced this system to ensure a steady flow of tax revenue and to reduce the burden on taxpayers at year-end. It’s mandatory for anyone whose total tax liability exceeds ₹10,000 in a financial year.
Who needs to pay advance tax?
- Salaried employees with additional income (rent, freelancing, capital gains, interest)
- Self-employed professionals (doctors, lawyers, consultants, freelancers)
- Business owners of all sizes
- Anyone whose total tax liability exceeds ₹10,000 after deducting TDS
Exempt from advance tax:
- Senior citizens (60+ years) who don’t have business or professional income
- Salaried employees whose tax is fully covered by TDS and have no other income
- Anyone whose total tax liability is below ₹10,000
How much tax do you need to pay?
Advance tax is paid in four installments with specific due dates and percentages:
| Due date | Percentage to pay | What this means |
|---|---|---|
| June 15 | 15% of total tax | First installment |
| September 15 | 45% of total tax | Second installment (including first) |
| December 15 | 75% of total tax | Third installment (cumulative) |
| March 15 | 100% of total tax | Final installment |
Important Note: You don’t pay the full percentage each time. For example, if you paid 15% in June, you only pay 30% more in September to reach the total 45%.
How to calculate your advance tax
You can calculate advance tax easily by following a few simple steps. Start with your income, adjust for deductions, apply the tax rates, and then find out how much you need to pay. If you are looking to calculate your advance tax, you can use the 1 Finance advance tax calculator.
Step 1: Estimate your total income
Add up all your income sources:
- Salary after standard deduction
- Business/professional income
- Rental income
- Interest from fixed deposits
- Capital gains
- Any other taxable income
Step 2: Calculate deductions
Subtract eligible deductions like:
- Section 80C (₹1.5 lakh max)
- Section 80D (medical insurance)
- Other applicable deductions
Step 3: Apply tax rates
Use the current tax slabs to calculate your tax liability.
Step 4: Subtract TDS already deducted
If your employer deducts TDS from salary, subtract that amount.
Step 5: Check if ≥ ₹10,000
If the remaining amount is ₹10,000 or more, you need to pay advance tax.
Example of advance tax calculation
Let’s say Priya is a software engineer who also freelances:
Income Details
| Income Details | Amount (₹) |
|---|---|
| Gross salary | 18,00,000 |
| Standard deduction | 50,000 |
| Net salary income | 17,50,000 |
| Freelancing income | 3,00,000 |
| Interest from FD | 50,000 |
| Total income | 21,00,000 |
Deductions
| Deductions | Amount (₹) |
|---|---|
| 80C investments | 1,50,000 |
| Medical insurance | 25,000 |
| Total deductions | 1,75,000 |
Taxable income: ₹21,00,000 – ₹1,75,000 = ₹19,25,000
Tax calculation:
- Up to ₹2.5 lakh: ₹0
- ₹2.5-5 lakh: ₹12,500 (5%)
- ₹5-10 lakh: ₹1,00,000 (20%)
- Above ₹10 lakh: ₹2,77,500 (30% of ₹9.25 lakh)
- Health & education cess: ₹15,600 (4%)
Total tax liability: ₹4,05,600
Less: TDS from salary: ₹2,00,000
Advance tax needed: ₹2,05,600
Since this exceeds ₹10,000, Priya must pay advance tax in installments.
Special rules for different categories
presumptive taxation (sections 44AD & 44ADA)
Small businesses and professionals can use presumptive taxation, which simplifies tax calculation:
- Section 44AD: Businesses with turnover up to ₹3 crores can declare 6-8% of turnover as income
- Section 44ADA: Professionals with receipts up to ₹75 lakhs can declare 50% as income
Special advance tax rule: These taxpayers pay 100% advance tax by March 15 only – no quarterly installments needed.
Senior citizens
Citizens aged 60+ without business/professional income are completely exempt from advance tax. They can pay all tax while filing their return.
How to pay advance tax
Online payment (recommended)
- Visit the Income Tax e-filing portal
- Click on “e-Pay Tax”
- Enter your PAN and mobile number
- Verify with OTP
- Select “Advance Tax (100)” as payment type
- Choose assessment year
- Enter tax amount
- Select payment mode (net banking/debit card/UPI)
- Complete payment and download challan
Offline payment
Visit any authorized bank with Challan ITNS 280 form and make the payment.
Penalties for not paying advance tax
The Income Tax Department charges interest for late or short payment:
Section 234B interest
- Applied if you pay less than 90% of your total tax liability by March 31
- Rate: 1% per month on the unpaid amount
Section 234C interest
- Applied for missing quarterly installment deadlines
- Rate: 1% per month for 3 months (first three installments) or 1 month (final installment)
Example: If you were supposed to pay ₹50,000 by June 15 but only paid ₹30,000, you’ll pay 1% per month interest on the ₹20,000 shortfall for 3 months.
Common questions about advance tax
Do salaried employees need to pay?
Most salaried employees don’t need to pay advance tax if their employer deducts sufficient TDS. However, you need to pay if you have:
- Freelancing income
- Rental income
- Capital gains
- Interest income above exemption limits
- Insufficient TDS deduction by employer
What’s the difference between TDS and advance tax?
TDS vs Advance Tax
| Aspect | TDS | Advance Tax |
|---|---|---|
| Who pays? | Deducted by employer/payer | Paid by taxpayer directly |
| When? | At source of payment | Quarterly installments |
| Applicability | Specific income types | Total tax liability > ₹10,000 |
| Control | Automatic deduction | Self-calculated and paid |
Can you revise advance tax payments?
Yes! If your income estimate changes during the year, you can adjust future installments accordingly. If you paid too much, you can reduce later payments or claim a refund when filing your return.
Important tips for advance tax
- Estimate conservatively: It’s better to pay slightly more than face penalties for underpayment
- Keep track of TDS: Ensure you account for all TDS already deducted
- Set reminders: Mark calendar for quarterly due dates
- Download challans: Always keep payment receipts for ITR filing
- Declare additional income: Inform your employer about other income sources for proper TDS calculation
Recent updates for advance tax
For financial year 2025-26, the advance tax due dates remain the same, but always check the official Income Tax website for any changes or holiday adjustments. The government sometimes extends due dates if they fall on holidays.
Understanding advance tax might seem complex initially, but it’s essentially about planning your tax payments throughout the year rather than scrambling at the end. This system benefits everyone – you avoid a large year-end payment, and the government maintains steady revenue flow. Remember, when in doubt, consult a chartered accountant or use the tax calculators available on various financial websites to ensure accurate compliance.
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