Advance Tax

Estimate your full-year income from salary, business, capital gains, interest and rent, then compute tax under your chosen regime. Subtract TDS and 87A rebate from this. The balance is your advance tax for FY 2025-26. Pay it in four instalments: 15% by 15 June, 45% cumulative by 15 September, 75% by 15 December, and 100% by 15 March 2026. For example, if your net liability after TDS is Rs 80,000, the cheques work out to Rs 12,000, Rs 24,000, Rs 24,000 and Rs 20,000 respectively. Pay through Challan 280 on the income tax portal.

If TDS from salary covers your entire tax liability, you don't need to pay advance tax. The trouble starts when you have side income your employer doesn't know about, like FD interest, rent, capital gains, freelance fees or dividends. The rule is simple: if your tax payable after all TDS exceeds Rs 10,000 in a financial year, advance tax kicks in. Senior citizens aged 60 and above with no business income are exempted. This issue often appears when rental income sits alongside salary; taxpayers may assume Form 16 is enough, then face 234B and 234C interest later.

Section 234C charges interest at 1% per month on the shortfall for each missed instalment. If your full-year liability isn't paid before 31 March, Section 234B starts running at 1% per month from 1 April till you actually pay. Both are simple interest, calculated for any part of a month as a whole month. Suppose you owed Rs 2 lakh and paid the entire amount in July; you'd cop 234B interest for April through July, four months, which is Rs 8,000. The interest isn't deductible anywhere, so it directly hits your pocket. Better to estimate and pay roughly on time.

By 15 September you must have paid 45% of your estimated annual tax liability cumulatively, which means the second instalment is effectively another 30% on top of the 15% already paid in June. Take net liability of Rs 1,00,000 as an example: Rs 15,000 by 15 June and Rs 30,000 more by 15 September, totalling Rs 45,000. If you've underpaid even by a rupee, 234C charges 1% per month for three months on the shortfall, so a Rs 10,000 gap costs Rs 300 in interest. Most clients I handle treat this date as the most important checkpoint.

Yes, and it's the easiest way nowadays. Log in to the income tax e-filing portal, go to e-Pay Tax, choose Income Tax then select Assessment Year 2026-27 and Type of Payment (100) Advance Tax. Pay through net banking, UPI, debit card or NEFT/RTGS. The challan receipt with BSR code and CIN is generated instantly and automatically reflects in your Form 26AS and AIS within a few days. Save the PDF receipt because you'll need it while filing ITR. Freelancers under presumptive 44ADA can pay the entire advance tax in a single instalment by 15 March.

Yes, but the law is reasonable here. Since capital gains can't always be predicted, you only need to include them in your remaining advance tax instalments after the gain actually arises. Sold shares in November? Pay the tax on that gain by 15 December along with your normal 75% instalment, or by 15 March at the latest. No 234C interest is charged for missed earlier instalments on this specific gain, provided you pay it by the next due date. Same treatment applies to lottery winnings and dividend income. Don't ignore the gain altogether though, or 234B interest will chase you from 1 April.

Pull up your Form 26AS and AIS on the income tax portal first, since these show TDS already credited under your PAN. Compute total tax on estimated annual income using your chosen regime, subtract Section 87A rebate, add 4% cess, and from that figure deduct the TDS you can reasonably expect for the year. The balance is what needs to flow through advance tax instalments. For instance, on a Rs 10 lakh salary with Rs 60,000 TDS already deducted and total liability of Rs 75,000, your advance tax is Rs 15,000, split across the four due dates per the prescribed percentages.