What Is Advance Tax?
Advance tax is simply income tax paid in instalments throughout the financial year, rather than as a single lump sum at the end. The concept is often called “pay-as-you-earn.” For salaried employees, employers deduct Tax Deducted at Source (TDS) from
monthly pay, which covers the tax on salary income. However, if you have other significant income sources where tax isn't deducted, or not deducted sufficiently, you are required to estimate your total tax for the year and pay it in advance. This ensures a steady flow of revenue for the government and prevents a heavy financial burden on taxpayers at the end of the year.
Who Is Liable to Pay?
The rule is straightforward: any individual whose estimated tax liability for the financial year is ₹10,000 or more is required to pay advance tax. This applies to freelancers, professionals, and business owners. It also applies to salaried individuals whose income from other sources—like rental income, capital gains from stocks or property, interest on fixed deposits, or freelance projects—pushes their total tax liability over the ₹10,000 threshold after accounting for TDS. The only major exemption is for resident senior citizens (aged 60 and above) who do not have any income from a business or profession.
How to Calculate for Salaried Individuals
If you are a salaried person with other income, the calculation requires a few steps. First, estimate your total income for the entire financial year (April 1, 2026, to March 31, 2027). This includes your salary, plus expected income from all other sources like rent, interest, dividends, and capital gains. Next, calculate the total income tax payable on this aggregate income according to the tax regime (new or old) you follow. From this total tax amount, subtract the TDS that your employer will deduct from your salary for the year. If the remaining amount is ₹10,000 or more, that is your advance tax liability.
The September 15 Instalment Deadline
The Income Tax Act mandates that advance tax be paid in four instalments. September 15, 2026, is the deadline for the second instalment. By this date, you must have paid a cumulative total of at least 45% of your total advance tax liability for the year. The instalment schedule is as follows:
By June 15: 15% of the total advance tax.
By September 15: 45% of the total advance tax (cumulative).
By December 15: 75% of the total advance tax (cumulative).
By March 15: 100% of the total advance tax.
Penalties for Missing the Deadline
Failing to pay your advance tax instalments on time attracts interest penalties. Interest under Section 234C is levied at 1% per month for three months if you fail to pay the required 45% by the September 15 deadline. This interest is charged on the shortfall amount. For example, if you were supposed to pay ₹45,000 by September 15 but only paid ₹30,000, interest will be charged on the ₹15,000 shortfall. Furthermore, if your total advance tax paid by March 31 is less than 90% of your final assessed tax, a penalty under Section 234B at 1% per month is charged on the overall deficit from April 1 of the next year until the tax is fully paid.
How to Pay Advance Tax Online
Paying advance tax is a simple online process. You can do so via the official Income Tax Department's e-Filing portal. On the portal, select the 'e-Pay Tax' option. You will need to fill out Challan 280. In the challan, enter your PAN, select the Assessment Year (for income earned in FY 2026-27, the AY is 2027-28), and choose '(100) Advance Tax' as the 'Type of Payment'. After verifying your details, you can complete the payment using net banking, debit card, or UPI. Once the payment is successful, a challan receipt with a Challan Identification Number (CIN) will be generated. It is crucial to save this receipt as proof of payment for when you file your income tax return.
