What Exactly Is Advance Tax?
Advance tax is essentially paying your income tax in instalments throughout the financial year, rather than as a single lump sum at the end. It's often called a 'pay-as-you-earn' system. The core idea is that if your total tax liability for the financial year is expected
to be ₹10,000 or more, the Income Tax Department requires you to estimate your income and pay tax on it in scheduled instalments. This applies to all forms of income, whether from salary, business, freelancing, rent, or investments, after accounting for any tax already deducted at source (TDS).
Who Is Required to Pay Advance Tax?
The requirement to pay advance tax is broad and covers various types of taxpayers. You are liable if your net tax payable exceeds ₹10,000 for the financial year. This includes salaried individuals who have significant additional income from sources like capital gains, rental income, or dividends where TDS is not sufficient to cover the total tax due. Freelancers, professionals, and business owners are almost always required to pay advance tax, as their income doesn't typically have tax deducted at the source in the same way a salary does. However, resident senior citizens (aged 60 and above) who do not have any income from a business or profession are exempt from paying advance tax.
Key Deadlines for FY 2026-27
The Income Tax Act has set four specific due dates for advance tax payments. For the Financial Year 2026-27 (Assessment Year 2027-28), the deadlines are structured cumulatively. By September 15, 2026, you must have paid at least 45% of your total estimated tax for the year. The complete schedule is as follows: On or before June 15, 2026: 15% of advance tax On or before September 15, 2026: 45% of advance tax (less tax already paid) On or before December 15, 2026: 75% of advance tax (less tax already paid) On or before March 15, 2027: 100% of advance tax (less tax already paid) It is important to note an exception for taxpayers under the presumptive taxation scheme (Sections 44AD and 44ADA), who can pay their entire advance tax in a single instalment by March 15, 2027.
How to Calculate and Pay Your Instalment
To calculate your advance tax, first, estimate your total income from all sources for the entire financial year (April 1, 2026, to March 31, 2027). Next, subtract any eligible deductions you plan to claim under sections like 80C. Calculate the total tax payable on this net income based on the applicable slab rates. From this total tax amount, deduct any TDS that has already been paid or will be paid by your employer or clients. If the remaining tax liability is over ₹10,000, that is your advance tax liability for the year. To pay, you can use Challan 280 on the official income tax e-filing portal. Select the assessment year as 2027-28 and choose 'Advance Tax' as the type of payment before proceeding through net banking, debit card, or other available options.
Penalties for Missing the Deadline
Failure to pay advance tax or underpayment of an instalment results in interest penalties under the Income Tax Act. Interest under Section 234C is levied at 1% per month for three months on the shortfall amount if you fail to meet the cumulative payment targets for the June, September, and December deadlines. For the final March instalment, the 1% interest is charged for one month. Additionally, if you have not paid at least 90% of your total assessed tax by the end of the financial year (March 31), interest under Section 234B at 1% per month will apply on the deficit from April 1, 2027, until the date you pay the full tax. These interest charges are mandatory and cannot be waived, making timely compliance crucial.
