What Exactly Is Advance Tax?
Advance tax is a system of paying your income tax in instalments throughout the financial year, rather than as a single lump sum at the end. It operates on a 'pay-as-you-earn' principle. This mechanism ensures a steady flow of revenue for the government
and prevents a heavy financial burden on taxpayers at the end of the year. The rules apply to income that is not typically covered by Tax Deducted at Source (TDS), such as profits from a business, rental income, or capital gains.
Who Needs to Pay Advance Tax?
According to the Income Tax Act, any individual, firm, or company whose estimated tax liability for the financial year is ₹10,000 or more is required to pay advance tax. This applies to a wide range of earners. Salaried employees whose employer already deducts sufficient TDS from their salary usually don't have to worry. However, if a salaried person has significant other income from sources like fixed deposit interest, stock market gains, dividends, or rent, they must pay advance tax on that additional income. Freelancers, consultants, and business owners whose income is not subject to TDS are also liable to pay advance tax if their liability crosses the ₹10,000 threshold.
Are There Any Exemptions?
There is a key exemption in place. Resident senior citizens, meaning individuals aged 60 years or older, are not required to pay advance tax, provided they do not have any income from a business or profession. If a senior citizen's income comes only from sources like pensions, interest, or rent, they are off the hook for advance tax payments.
Key Deadlines for Financial Year 2026-27
For most taxpayers, the advance tax is due in four instalments. The upcoming deadline is for the second payment. By September 15, 2026, you must have paid at least 45% of your total estimated tax liability for the year. The percentages are cumulative. This means the 45% includes the first 15% instalment that was due on June 15. The subsequent deadlines are December 15 (75%) and March 15 (100%).
How to Calculate Your Second Instalment
Calculating your advance tax involves a few steps. First, estimate your total income from all sources for the entire financial year (April 1, 2026, to March 31, 2027). From this, subtract any eligible deductions to arrive at your estimated taxable income. Next, calculate the income tax payable on this amount based on the applicable slab rates. Finally, subtract any TDS that has been or will be deducted during the year. If the remaining tax liability is ₹10,000 or more, this is your advance tax amount. For the September 15 deadline, you need to ensure that the total amount paid (including the June instalment) equals 45% of this calculated liability.
How to Pay Online
The process of paying advance tax online is straightforward. You can do so through the official Income Tax Department's e-Filing portal. After navigating to the 'e-Pay Tax' section, you will need to enter your PAN, select the Assessment Year (for this period, it is 2027-28), and choose 'Advance Tax' as the payment type. You can complete the transaction using various methods like net banking, debit card, or UPI. Once the payment is made, be sure to save the challan receipt as proof of payment.
What if You Miss the Deadline?
Failing to pay your advance tax on time or underpaying an instalment results in interest penalties. Interest under Section 234C of the Income Tax Act is levied at a rate of 1% per month for the period of delay on the shortfall amount. Additionally, if your total advance tax paid by March 31 is less than 90% of your assessed tax, interest under Section 234B at 1% per month will be charged on the deficit from April 1 of the next year until the tax is fully paid.
