Understanding Advance Tax
Advance tax is essentially a 'pay as you earn' system for income tax. Instead of settling your entire tax liability in a lump sum at the end of the financial year, you pay it in instalments throughout the year. This applies to income that is not already
covered by Tax Deducted at Source (TDS), such as earnings from a business, freelancing, rental income, or capital gains. The core principle is to align your tax payments with the period in which your income is earned.
Who is Liable to Pay?
According to the Income Tax Act, any individual, freelancer, or business owner whose estimated tax liability for the financial year is ₹10,000 or more is required to pay advance tax. This also applies to salaried individuals who have significant additional income from sources like fixed deposits, stock market gains, or rent, which are not disclosed to their employer for TDS purposes. However, resident senior citizens (aged 60 and above) who do not have any income from a business or profession are exempt from this requirement.
Key Dates You Cannot Miss
For the financial year 2026-27, the Income Tax Department has set four key deadlines for advance tax payments. The upcoming deadline is particularly important. The dates and the cumulative amount of tax to be paid are as follows:
- By June 15, 2026: 15% of the total advance tax liability.
- By September 15, 2026: 45% of the total tax liability.
- By December 15, 2026: 75% of the total tax liability.
- By March 15, 2027: 100% of the total tax liability.
This structure ensures that you are progressively clearing your tax dues as the year unfolds.
How to Calculate Your Liability
Calculating your advance tax might seem daunting, but it's a straightforward process. First, estimate your total income from all sources for the entire financial year. From this, subtract any applicable deductions you plan to claim, such as those under Section 80C or 80D. Apply the relevant income tax slab rates to this net taxable income to determine your total estimated tax for the year. Finally, deduct any TDS that has already been paid on your behalf. If the remaining amount exceeds ₹10,000, you are liable to pay advance tax. For the September 15 deadline, you must ensure that at least 45% of this final amount has been paid.
The Cost of Missing a Deadline
Failing to pay your advance tax instalments on time can lead to interest penalties. Under Section 234C of the Income Tax Act, interest of 1% per month for a period of three months is levied on the shortfall amount for the June, September, and December instalments. For example, if you miss the September 15 deadline, interest will be charged on the deficit until the payment is made. Furthermore, if less than 90% of your total assessed tax is paid by March 31, a separate interest under Section 234B is charged at 1% per month on the unpaid amount from the beginning of the next financial year until the date of payment.
How to Pay Online
Paying your advance tax is a simple online process. You can visit the official Income Tax e-Filing portal and use the 'e-Pay Tax' service. After entering your PAN and verifying it with an OTP sent to your mobile number, you can proceed to make a new payment. You will need to select 'Income Tax', the correct Assessment Year (which for FY 2026-27 is AY 2027-28), and choose 'Advance Tax' as the type of payment. The portal accepts payments through various modes, including net banking, debit card, and UPI.
