What is Advance Tax?
Advance tax is essentially a 'pay-as-you-earn' system for income tax. Instead of waiting until the end of the financial year to pay your entire tax bill in a lump sum, the government requires you to pay it in instalments throughout the year. This mechanism
helps the government maintain a steady revenue flow and prevents a heavy, single payment burden on taxpayers at year-end. The core principle is simple: if your total tax liability for the year is expected to be ₹10,000 or more, you are generally required to pay advance tax.
Who Needs to Pay Advance Tax?
The rules for advance tax apply to a wide range of taxpayers. If your net tax liability for the year, after accounting for any Tax Deducted at Source (TDS), is ₹10,000 or more, you must pay advance tax. This includes salaried individuals who have significant income from other sources like rent, capital gains, interest, or dividends. It is also mandatory for freelancers, consultants, and business owners who are not covered under the presumptive taxation scheme. However, there is an important exemption: resident senior citizens (aged 60 and above) who do not have income from a business or profession are not required to pay advance tax.
The September 15 Deadline Explained
The Income Tax Act mandates four advance tax instalments with specific due dates. For the financial year 2026-27, the second deadline is September 15, 2026. By this date, you are required to have paid a cumulative total of at least 45% of your estimated total tax liability for the year. This 45% includes the first instalment of 15% that was due by June 15. So, if you paid 15% in June, you need to pay at least another 30% by the September deadline to reach the cumulative 45% threshold. The subsequent deadlines are December 15 (for 75%) and March 15 (for 100%).
How to Calculate Your Second Instalment
Calculating your advance tax requires estimation. First, project your total income from all sources for the entire financial year (April 1, 2026, to March 31, 2027). This includes salary, business profits, capital gains, rental income, and interest. Next, subtract any eligible deductions you plan to claim under sections like 80C, 80D, etc. From this net taxable income, calculate your total estimated tax liability for the year using the applicable tax slab rates. Finally, subtract the TDS that has been or is expected to be deducted from your income during the year. If the resulting amount is over ₹10,000, that is your advance tax liability. By September 15, the total amount paid should be at least 45% of this figure.
Consequences of Missing the Deadline
Failing to pay the required amount of advance tax by the due date has financial consequences. The Income Tax Act levies penal interest for shortfalls. Under Section 234C, interest is charged at 1% per month for a period of three months on the amount of shortfall for the September 15 instalment. This interest is calculated on the difference between the 45% that was due and the amount you actually paid. Furthermore, if the total advance tax paid by the end of the year (March 31) is less than 90% of your total assessed tax, you will be liable to pay interest under Section 234B at 1% per month from the beginning of the next financial year until the tax is fully paid.
How to Make the Payment
Paying advance tax is a straightforward online process. You need to use Challan 280 on the income tax department's e-payment portal. On the portal, select the Assessment Year as 2027-28 (which corresponds to the Financial Year 2026-27). Crucially, ensure you select '(100) Advance Tax' as the 'Type of Payment'. You can complete the transaction using net banking, a debit card, or UPI. After a successful payment, you will receive a challan receipt containing the BSR code and challan serial number, which you should save for your records and for filing your income tax return.
