Who Is Liable to Pay Advance Tax?
Advance tax is a 'pay-as-you-earn' system for income tax. If your estimated total tax liability for the financial year (after deducting TDS) is ₹10,000 or more, you are required to pay advance tax. This rule applies to salaried individuals, freelancers,
business owners, and professionals. For salaried individuals, this often becomes applicable when they have significant income from other sources like rent, capital gains, or stock dividends, which isn't covered by their employer's TDS deductions. 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.
The September 15 Installment
The Income Tax Department sets four deadlines for advance tax payments each financial year. The upcoming date, September 15, 2026, is the second of these deadlines for the Financial Year 2026-27. By this date, you are required to have paid at least 45% of your total estimated tax liability for the year. This is a cumulative figure. It means the 15% you paid by the first deadline of June 15 plus an additional 30% is due now. If you missed the first payment, you should pay the full 45% by September 15 to catch up.
How to Calculate Your Payment
Calculating your advance tax payment involves a few key steps. First, estimate 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 applicable deductions you plan to claim, such as those under Section 80C. This gives you your estimated taxable income. Apply the income tax slab rates for the financial year to this amount to find your total estimated tax liability. Finally, subtract any Tax Deducted at Source (TDS) that has already been cut from your income. If the remaining amount is over ₹10,000, you must pay advance tax. For the September deadline, you need to ensure that 45% of this final liability is paid.
Income Sources to Double-Check
When estimating annual income, taxpayers often overlook certain streams. Be sure to include capital gains from the sale of shares, mutual funds, or property. Dividend income and interest earned from fixed deposits and savings accounts must also be factored in. For freelancers and consultants, income can be unpredictable, but a reasonable projection based on current and expected projects is necessary. Salaried individuals with a side hustle or significant freelance income must combine this with their salary for an accurate estimate.
Penalties for Missing the Deadline
Failing to pay advance tax on time attracts interest penalties. Interest under Section 234C is levied for deferment of installments. If you pay less than the required 45% by September 15, a simple interest of 1% per month for three months is charged on the shortfall amount. Furthermore, if your total advance tax paid during the year is less than 90% of your final assessed tax, you will face interest under Section 234B. This is also calculated at 1% per month on the deficit from April 1 of the following year until the tax is fully paid.
How to Make the Payment Online
Paying your advance tax is a straightforward online process. Visit the official Income Tax e-Filing portal (incometax.gov.in) and find the 'e-Pay Tax' option, which is available under 'Quick Links' on the homepage. You will need to enter your PAN, verify it with an OTP sent to your mobile, and then proceed. Select the Assessment Year as 2027-28 (for the financial year 2026-27) and the type of payment as 'Advance Tax'. Fill in the tax amount and choose your preferred payment method, such as net banking, debit card, or UPI, to complete the transaction. Once paid, download the challan receipt for your records.
