Advance tax is mandatory if your net tax liability exceeds ₹10,000 for the year. Salaried employees whose entire tax is covered by employer TDS are exempt. However, if you have additional income — FD interest, rent, freelance income, capital gains from stocks or mutual funds — that creates extra tax liability beyond what employer deducts, you must pay advance tax. Self-employed individuals, business owners, and traders must pay advance tax quarterly without exception.
Interest for Not Paying Advance Tax
Section 234B: If you pay less than 90% of total tax by March 31, interest of 1% per month is charged from April 1 until ITR filing date. Section 234C: For missing quarterly deadlines — 1% per month for 3 months on the shortfall. Example: If your annual tax is ₹1 lakh and you pay nothing by June 15 (should pay ₹15,000), interest = ₹15,000 × 1% × 3 months = ₹450 extra. Amounts may seem small but compound over the year.
Special Rule for Capital Gains and Dividends
Capital gains from stocks, mutual funds, or property are difficult to estimate in advance. Special rule: If capital gains arise after September 15, pay the full tax by March 15 — no 234C interest for earlier quarters. This means stock traders and investors don't need to estimate quarterly — they can pay the full capital gains tax in March 15 installment without penalty for Q1, Q2, Q3 shortfall.
Frequently Asked Questions
I am salaried — do I need to pay advance tax?▼
Only if your tax after TDS exceeds ₹10,000. Check: your total annual tax liability (use our calculator above) minus TDS your employer deducts. If remainder > ₹10,000, pay advance tax. Most salaried employees whose TDS fully covers their tax are exempt. Common exception: salaried with FD interest, rental income, or freelance work.
What is Challan 280?▼
Challan 280 is the payment form for income tax (advance tax, self-assessment tax, regular assessment tax). Choose "Type of Payment: 100 — Advance Tax" when paying advance tax. For paying tax while filing ITR (if there's a balance due), use "Type 300 — Self Assessment Tax." Keep the challan receipt — you'll need the BSR code and challan serial number for ITR filing.
Can I pay all advance tax in one installment?▼
Yes, you can pay 100% by March 15 deadline. However, if you miss Q1 (June 15) and Q2 (Sep 15) installments, you will pay 234C interest for those quarters. For salaried employees, paying in Q4 (March 15) is often simpler. For freelancers and business owners with steady income, quarterly payments avoid interest buildup.