What is Advance Tax?
Advance tax is essentially a 'pay-as-you-earn' system for income tax. Instead of paying your entire tax liability in a lump sum at the end of the year, the Income Tax Act requires you to pay it in instalments throughout the financial year in which you earn the income.
This system helps the government maintain a steady flow of revenue and makes it easier for taxpayers to manage their financial obligations without facing a large, one-time burden.
Who Is Required to Pay?
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 taxpayers, including salaried individuals who have other sources of income like rent, capital gains, or freelance work not fully covered by their employer's TDS. It also includes self-employed professionals, freelancers, and business owners. However, there is an exemption for resident senior citizens (aged 60 and above) who do not have any income from a business or profession.
The September 15 Installment
The advance tax schedule is divided into four quarterly instalments. The September 15, 2026, deadline is for the second instalment. By this date, you are required to have paid a cumulative minimum of 45% of your total estimated advance tax for the year. If you paid the first instalment of 15% by June 15, you need to pay the remaining 30% by September 15 to reach the 45% cumulative total.
How to Calculate Your Dues
Calculating your advance tax involves a few straightforward steps. First, estimate your total income from all sources for the entire financial year (April 1, 2026, to March 31, 2027). Next, subtract any applicable deductions you plan to claim under sections like 80C or 80D. Apply the relevant income tax slab rates to this net taxable income to calculate your gross tax liability. From this amount, subtract any Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) that has already been deducted or is expected to be deducted. If the remaining amount is ₹10,000 or more, that is your advance tax liability for the year. For the September 15 deadline, you must ensure that 45% of this total liability has been paid.
A Step-by-Step Payment Guide
Paying advance tax online is a simple process using Challan 280. You can start by visiting the Income Tax Department's e-Pay Tax portal. You will need to enter your PAN, mobile number, and authenticate with an OTP. On the next screen, select 'Income Tax' and the correct assessment year, which for income earned in FY 2026-27 is AY 2027-28. For the type of payment, choose '(100) Advance Tax'. After filling in the tax amount, you can proceed to pay using net banking, debit card, UPI, or other available methods. Once the payment is successful, a challan receipt with a Challan Identification Number (CIN) will be generated, which serves as proof of payment.
Consequences of Missing the Deadline
Failing to pay the required amount by the due date attracts penal interest. Specifically, interest under Section 234C of the Income Tax Act is levied at a rate of 1% per month for a period of three months on the shortfall amount for the September instalment. For example, if you fall short of the 45% mark, interest will be calculated on the deficit. Furthermore, if your total advance tax paid by March 31 is less than 90% of your total assessed tax, an additional interest under Section 234B at 1% per month will be charged from April 1 of the following year until the tax is fully paid. These interest charges are mandatory and cannot be waived.
