Who Needs to Pay Advance Tax?
Advance tax, often called a 'pay-as-you-earn' tax, applies to individuals and entities whose total tax liability for the financial year is ₹10,000 or more. This rule covers a wide range of taxpayers. Salaried individuals must pay if they have significant
other income from sources like rent, capital gains, or stock dividends that isn't covered by their employer's Tax Deducted at Source (TDS). Freelancers, consultants, and business owners are also required to pay advance tax as they don't have an employer deducting taxes for them. However, there is an important exemption: resident senior citizens (aged 60 and above) who do not have any income from a business or profession are not required to pay advance tax.
The September 15 Deadline and Instalment Rules
The Income Tax Act mandates that advance tax be paid in four instalments throughout the year. The September deadline is for the second of these payments. For the Financial Year 2026-27, the due dates for individuals and corporations are structured cumulatively. By June 15, 2026, taxpayers should have paid at least 15% of their total estimated tax. The upcoming deadline on September 15, 2026, requires that a cumulative total of at least 45% of the estimated tax liability for the year is paid. This means if you paid 15% in June, you need to pay an additional 30% by September 15. The subsequent deadlines are December 15 (75%) and March 15, 2027 (100%).
How to Calculate Your September Payment
Calculating your September instalment is a multi-step process. 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 (like those under Section 80C) to arrive at your estimated taxable income. Apply the relevant income tax slab rates to this figure to calculate your total estimated tax for the year. Remember to add the 4% health and education cess. From this total tax amount, subtract any TDS that has already been deducted or will be deducted during the year. If the remaining amount is over ₹10,000, you are liable for advance tax. To find your September liability, calculate 45% of this net tax amount. Then, subtract the instalment you already paid in June to determine the exact amount due by September 15.
The Process of Paying Online
The most convenient way to pay your advance tax is online through the official income tax portal using Challan 280. To do this, visit the e-payment section of the tax website. You will need to enter your PAN, select the correct Assessment Year (which for FY 2026-27 is AY 2027-28), and choose the payment type as '(100) Advance Tax'. After filling in your contact details, you can proceed to payment via 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 the details are required when filing your final income tax return.
What Happens If You Miss the Deadline?
Failing to pay the required amount by the due date has financial consequences. The Income Tax Act imposes interest under two key sections. For a delay or shortfall in paying a specific instalment, interest under Section 234C is levied at 1% per month for a period of three months on the deficit amount. For example, if you fall short of the 45% cumulative target by September 15, this interest will be charged on the shortfall for October, November, and December. Additionally, if your total advance tax paid by March 31 is less than 90% of your final assessed tax, interest under Section 234B at 1% per month is charged from the start of the next financial year until the tax is fully paid. These interest charges are mandatory and cannot be waived, making timely compliance essential.
