Advance tax: who pays, when, and what a shortfall costs

Anyone whose estimated tax for the year, after subtracting tax deducted and collected at source, is ₹10,000 or more. That covers most freelancers, professionals and business owners, and a surprising number of salaried people: those with rent, interest, capital gains, a second employer, or a job change where the new employer did not count the earlier salary.

A resident senior citizen aged 60 or above with no income from business or profession is exempt, and pays any balance as self-assessment tax with the return. Non-residents with Indian income are within advance tax like anyone else.

Taxpayers on presumptive taxation under sections 44AD or 44ADA pay the whole amount in a single instalment by 15 March. Any tax paid up to 31 March counts as advance tax for the year. For financial year 2026-27 the dates are 15 June, 15 September and 15 December 2026 and 15 March 2027.

1. Estimate total income for the full year under every head: salary, house property, business or profession, capital gains realised so far, interest and dividends.
2. Subtract the deductions you are entitled to in the regime you will choose, and compute tax on the slabs with cess and any surcharge. Our slab guide has the table.
3. Subtract tax that will be deducted or collected at source during the year, and any relief.
4. If the balance is ₹10,000 or more, multiply by the cumulative percentage for the instalment and subtract what you have already paid.

Revise the estimate at each date. A consultant whose income jumps in October pays the catch-up in December; the law expects a reasonable estimate at each date, not foresight.

Capital gains and windfalls. A gain, a lottery win or a dividend cannot be predicted. Where such income arises after an instalment date, no interest is charged for the earlier shortfall provided the tax on it is paid in the remaining instalments, or by 31 March if it arises after 15 March.

On the e-filing portal use e-Pay Tax, choose Income Tax, the assessment year following the financial year, and Advance Tax (code 100) as the type of payment. Pay by net banking, debit card, UPI or over the counter with the generated challan. The payment appears in Form 26AS and the Annual Information Statement within days, and is claimed in the return under taxes paid. Keep the challan: the BSR code, date and serial number are asked for when filing.

Section 234C, for deferring instalments. Simple interest at 1 percent a month on the shortfall against each cumulative target: for three months on the June, September and December shortfalls, and for one month on the March shortfall. No interest is charged for June and September if at least 12 percent and 36 percent have been paid.

Section 234B, for underpaying overall. If advance tax paid by 31 March is less than 90 percent of the assessed tax, interest at 1 percent a month runs on the shortfall from 1 April of the assessment year until the tax is paid.

An example. A freelancer’s tax for the year after TDS is ₹2,00,000 and she pays nothing until she files in July. Interest under 234C: 1 percent for three months on ₹30,000, on ₹90,000 and on ₹1,50,000, and one month on ₹2,00,000, which is ₹10,100. Interest under 234B: 1 percent a month on ₹2,00,000 for April to July, ₹8,000. Total ₹18,100, or about 9 percent of the tax, for doing nothing.

For income earned from 1 April 2026 these provisions are sections 424 and 425 of the Income-tax Act, 2025, with the same rates.

An employee can declare other income, and the tax deducted on it, to the employer in Form 122 or the payroll portal, and the employer will deduct the additional tax from salary across the remaining months. That replaces advance tax entirely and avoids interest, as long as the declaration is made early enough in the year.

Our tax planning service computes and calendars the instalments; businesses and freelancers get them alongside the return.