What is advance tax and who has to pay it?

Advance tax is income tax paid during the year in instalments, rather than in one lump at the end, on a pay-as-you-earn basis. You have to pay it if your total tax for the year, after reducing the TDS already deducted, crosses a small threshold. This mainly affects the self-employed, business owners, professionals, and salaried people with large income outside salary such as capital gains, interest or rent on which enough tax was not deducted at source.

What are the advance tax due dates?

For most taxpayers advance tax is paid in four instalments during the financial year, with due dates in June, September, December and March. A set percentage of your estimated yearly tax is due by each date, rising through the year until the full amount is paid by the last instalment in March. Taxpayers who use the presumptive scheme pay in a single instalment by March. Confirm the exact dates for the year on the income tax portal.

How do I calculate advance tax?

Estimate your total income for the year from all sources, apply the tax slab rates to find your tax, add any surcharge and cess, then subtract the TDS you expect to be deducted. The balance is what you owe as advance tax. Spread it across the instalments in the required percentages. Because it is based on an estimate, you revise it at each instalment as your actual income becomes clearer, topping up or easing off accordingly.

What is interest under sections 234B and 234C?

These are interest charges for not paying enough advance tax. Section 234B applies when you pay less than the required share of your total tax as advance tax by the year end, and interest runs on the shortfall from the start of the assessment year until you pay. Section 234C applies when you miss the required percentage at any individual instalment date, charging interest for the delay on that shortfall. Both are calculated as simple monthly interest on the amount short.

What happens if my income estimate turns out wrong?

Advance tax is based on an estimate, so being slightly off is normal. If you earned more than expected, you top up at the next instalment or pay the balance as self-assessment tax before filing, though interest may apply on the earlier shortfall. If you paid more than needed, the excess comes back as a refund when you file your return. Revisiting your estimate at each due date keeps the difference small and the interest low.

Advance Tax: Due Dates, Calculation and Who Pays (2026)

Income tax in India is not only paid at the end of the year. If you earn enough that a meaningful amount of tax is due beyond what employers and banks deduct at source, the law expects you to pay as you earn, in instalments through the year. That is advance tax. It catches out the self-employed, business owners, and salaried people with large side income, because they assume the year-end return is the only moment that matters and then face interest for having paid late. This guide explains who must pay advance tax, the instalment schedule and the percentage due at each stage, how to calculate the amount, how the interest under sections 234B and 234C works in general terms, and walks through a worked example. Where the dates and thresholds change from year to year, confirm the current position on the income tax portal.

What advance tax is

Advance tax is simply income tax paid during the financial year in which you earn, rather than in a single payment afterwards. The idea is pay-as-you-earn: as income comes in through the year, tax on it goes to the government in stages. For a salaried person whose employer deducts TDS every month, most of this is already handled, because that monthly deduction is itself a form of paying as you earn. Advance tax becomes your responsibility when there is income on which enough tax is not being deducted at source, so you have to send it yourself.

Who has to pay advance tax

You are liable for advance tax when your total tax for the year, after subtracting the TDS already deducted, crosses a small threshold. In practice that brings in several groups:

The self-employed and professionals: freelancers, consultants, doctors, lawyers and others whose income has little or no TDS against it.
Business owners: traders, shopkeepers and firms whose profits are not subject to salary-style monthly deduction.
Salaried people with large other income: if you have significant capital gains, interest, rent or dividend income on which tax was not fully deducted, you may owe advance tax on top of your salary TDS.
Anyone crossing the threshold: the test is the tax due after TDS, so it is the balance, not your job title, that decides.

Senior citizens without business income are generally spared from advance tax, one of the few blanket exemptions. Everyone else who crosses the threshold is expected to pay by the instalment dates.

The instalment schedule

For most taxpayers, advance tax is spread across four instalments through the financial year, and a rising share of your total estimated tax is due by each date. The pattern is designed so that a quarter is paid early, around half by the middle of the year, three quarters by the third quarter, and the whole amount by the last instalment in March. Here is the standard schedule:

Taxpayers who declare income under the presumptive scheme have a simpler path: they pay the whole of their advance tax in a single instalment by the last date in March. For everyone else, the four-stage schedule applies, and the percentages are cumulative, so by September you should have paid at least 45 percent in total, not 45 percent on top of the first instalment. Confirm the exact dates for the year on the income tax portal, as they can shift when a date falls on a holiday.

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How to calculate advance tax

Calculating advance tax is a matter of estimating the year ahead and then paying tax on that estimate in stages. The steps are the same whatever your income:

Estimate total income: add up your expected income for the year from all sources, business, profession, salary, capital gains, interest and rent.
Apply the slab rates: work out the tax on that income using the slab rates for your chosen regime. Our guide to the income tax slabs shows the current bands.
Add surcharge and cess: if applicable, add any surcharge for higher incomes and the health and education cess to arrive at your total tax.
Subtract expected TDS: reduce the tax by the TDS you expect to be deducted against your income during the year.
Spread across instalments: the balance is your advance tax, which you pay in the required cumulative percentages by each due date.

Because it rests on an estimate, advance tax is not a one-and-done calculation. At each instalment you revisit the estimate with the actual income you have earned so far, and top up or ease off so that your cumulative payment meets the required share.

A worked example

Suppose a freelance designer estimates a total income for the year that produces a tax liability, after surcharge and cess, of Rs 1,00,000. During the year she expects Rs 20,000 of TDS to be deducted by clients who withhold tax on her fees. Her advance tax is the balance, Rs 80,000. She now spreads that Rs 80,000 across the four instalments using the cumulative percentages:

By 15 June: at least 15 percent of Rs 80,000, which is Rs 12,000.
By 15 September: at least 45 percent cumulative, Rs 36,000, so she pays a further Rs 24,000 to reach that total.
By 15 December: at least 75 percent cumulative, Rs 60,000, a further Rs 24,000.
By 15 March: 100 percent, Rs 80,000, the final Rs 20,000.

If, by September, her actual income is running higher than she first thought, she revises the full-year estimate upward and pays a larger September instalment so she stays at or above the required 45 percent of the new, higher tax. If her work slows and income falls, she can ease the later instalments. The point of the example is that the percentages apply to the current best estimate of the year's tax, and keeping that estimate honest at each date is what keeps interest away.

Interest under sections 234B and 234C

Two interest charges enforce advance tax, and understanding them in general terms helps you avoid them. Both are simple interest calculated monthly on the amount you fell short by:

Section 234C, the instalment charge: this applies when you miss the required cumulative percentage at any individual due date. If you should have paid 45 percent by September but paid less, interest runs on that shortfall for the period of the delay. It is a penalty for being late at a specific instalment, even if you catch up later.
Section 234B, the year-end charge: this applies when your total advance tax paid through the year falls short of the required share of your final tax. Interest runs on the shortfall from the start of the assessment year until you pay the balance, so it keeps accruing until the gap is closed.

The practical lesson is that paying something close to the right amount at each date is much cheaper than paying nothing and settling up at the end, because the interest compounds the delay. The exact interest rate and the way the months are counted are set in the law, so confirm the current figures on the income tax portal if you need to compute the charge precisely.

How to pay and keep proof

Advance tax is paid online through the income tax payment system, where you select the correct assessment year and the head of payment for advance tax, then pay by net banking or another accepted method. The receipt you get carries a challan identification number, and you should keep it, because that number is how the payment is matched to your PAN and reflected in your Form 26AS. When you later file your return, the advance tax you paid is credited against your total tax, and any excess comes back as a refund. Reconciling your challans against Form 26AS before filing is worth the few minutes it takes, because a payment that did not get tagged to your PAN is a payment the department cannot see.

Practical tips to stay on top of it

A few habits keep advance tax from becoming a year-end shock:

Track income through the year: if your sales and fees are recorded as they happen, estimating the year is quick rather than guesswork.
Set reminders for the four dates: the June, September, December and March deadlines are easy to forget when you are running a business.
Revise the estimate each quarter: update your full-year figure with actual income so far, so each instalment reflects reality.
Keep every challan: the payment proof is what credits the tax to you at filing.

The bottom line

Advance tax turns your yearly tax into four manageable payments and keeps interest at bay if you pay the right share by each date. Estimate your income, compute the tax, subtract expected TDS, and pay the balance across the June, September, December and March instalments, revising as the year unfolds. Because the whole thing rests on knowing your income as it comes in, keeping clean records is the real work, and confirming the current dates and rates on the income tax portal is the final check. IndiaCRM records your sales and expenses as they happen in one free app, so your income estimate at each instalment is grounded in real numbers rather than memory. Get the mobile app, read our TDS guide to see how deductions reduce what you owe, or explore the features.