What is Advance Tax and Who Must Pay It?
Advance tax is income tax paid in installments during the financial year itself ā rather than in a lump sum at the end. For Tax Year 2026-27, advance-tax rules apply under the Income Tax Act, 2025. Taxpayers whose net estimated tax payable for the year exceeds ā¹10,000 generally need to pay advance tax, subject to applicable exceptions and special timing rules. This includes salaried employees with significant other income (interest, rent, capital gains, freelance), self-employed professionals, businesspersons, and retirees with taxable income.
The advance tax system was designed to prevent a large single tax payment at year-end from causing cash flow difficulties for the government. By spreading tax payments across the year, taxpayers also avoid a large outflow in March, which is beneficial for personal financial planning.
Note: Certain taxpayers using presumptive taxation can have different advance-tax timing requirements. Check the applicable provision and your filing situation before relying on the generic quarterly schedule.
Advance Tax Payment Schedule for Tax Year 2026-27
The Income Tax Department requires advance tax to be paid in four installments during the financial year. Missing any installment or paying less than the required amount attracts interest under the applicable interest provisions at the rates set under the current law on the shortfall. The schedule is as follows:
- By June 15: At least 15% of estimated annual tax liability must be paid.
- By September 15: Cumulative payment must reach at least 45% of estimated annual tax.
- By December 15: Cumulative payment must reach at least 75% of estimated annual tax.
- By March 15: Full 100% of estimated annual tax liability must be paid.
How to Calculate Your Advance Tax Liability
Start by estimating your total income for the full financial year ā including salary, business income, freelance income, rental income, interest income, and capital gains. Then calculate your total income tax on this estimated income using the applicable tax regime (Old or New). Subtract any TDS already deducted or likely to be deducted by employers and banks. The remaining amount is your advance tax liability.
For example, if your estimated annual tax is ā¹1,20,000 and TDS of ā¹60,000 will be deducted by your employer, your net advance tax liability is ā¹60,000. By June 15, you must pay ā¹9,000 (15%), by September 15 cumulatively ā¹27,000 (45%), by December 15 cumulatively ā¹45,000 (75%), and by March 15 the full ā¹60,000.
Who is Exempt from Advance Tax?
Senior citizens aged 60 years or above who do not have income from business or profession are exempt from advance tax. They only need to pay their full tax liability by March 31. Additionally, if your total tax liability (after TDS) for the year is ā¹10,000 or less, you are not required to pay advance tax.
Consequences of Not Paying Advance Tax
If you fail to pay advance tax or pay less than the required amount, you are liable to pay interest: The current-law provision corresponding to the former Section 234B provides 1% monthly interest in specified cases on the unpaid amount if you have paid less than 90% of tax by March 31. The current-law provision corresponding to the former Section 234C provides interest for specified installment shortfalls for shortfalls in each installment. These penalties add up ā on a ā¹50,000 shortfall for 3 months, interest can total ā¹1,500.
How to Pay Advance Tax Online
Advance tax is paid using Challan 280 on the Income Tax e-filing portal (incometax.gov.in). Select "Advance Tax (100)" as the type of payment. You can pay via net banking, debit card, NEFT, or RTGS. Always keep the challan receipt as proof of payment. For Tax Year 2026-27 payments, select Tax Year 2026-27 in the e-filing portal and verify the current payment instructions before submitting.
Source: Income Tax Department (incometax.gov.in) Ā· Income Tax Act, 2025 Ā· Tax Year 2026-27 Ā· Last Updated September 2026 Ā· Not financial advice