What Is Advance Tax?
Advance tax is an income tax that you pay during the financial year itself, rather than in a lump sum after the year ends. It operates on a “pay as you earn” model, ensuring that the government receives a steady flow of tax revenue throughout the year.
This system applies to most taxpayers, including salaried individuals with other income sources, freelancers, and businesses, whose total tax liability for the year is expected to be ₹10,000 or more after accounting for any Tax Deducted at Source (TDS). Think of it as paying your tax bill in instalments, which helps avoid a large, single payment when you file your return.
Who Is Required to Pay?
You are liable to pay advance tax if your estimated tax for the financial year 2026-27 is ₹10,000 or more. This rule is broad and covers various types of taxpayers. This includes salaried employees who have additional income from sources like rent, capital gains, interest, or dividends. It also applies to freelancers, consultants, and business owners. The key exception is for resident senior citizens (aged 60 and above) who do not have any income from a business or profession; they are exempt from paying advance tax. Taxpayers who have opted for the presumptive taxation scheme also have different rules, needing to pay their entire tax in one go by March 15, 2027.
Due Dates for FY 2026-27
The Income Tax Department has set four key dates for advance tax payments throughout the financial year. For the Financial Year 2026-27, the deadlines and the minimum cumulative tax to be paid are as follows. By June 15, 2026, you should have paid at least 15% of your total estimated tax. The second instalment, due by September 15, 2026, requires you to have paid a cumulative total of at least 45% of your tax liability. The subsequent deadlines are December 15, 2026 (for 75%) and March 15, 2027 (for 100%). The September 15 deadline is crucial as it marks the point where nearly half of your estimated annual tax should be paid.
How to Calculate the September Instalment
Calculating your September instalment involves a few clear steps. First, estimate your total income from all sources for the entire financial year (April 1, 2026, to March 31, 2027). This includes your salary, business profits, rental income, capital gains, and interest. Next, subtract any applicable deductions (like those under Section 80C or 80D) to arrive at your net taxable income. Apply the relevant income tax slab rates for FY 2026-27 to this income to calculate your total tax. Don't forget to add the 4% health and education cess. From this total tax liability, subtract any TDS that has been or will be deducted by others (like your employer). If the remaining amount is over ₹10,000, that is your advance tax liability for the year. For the September 15 deadline, you need to ensure that at least 45% of this total advance tax liability has been paid. To find the exact amount for this instalment, calculate 45% of your total advance tax and then subtract the 15% you already paid in June.
The Payment Process
Paying your advance tax is a straightforward online process. You can make the payment through the official Income Tax e-filing portal. You will need to use Challan No. ITNS 280. When filling out the challan, ensure you correctly select 'Advance Tax' as the type of payment and the appropriate Assessment Year (which would be 2027-28 for income earned in FY 2026-27). Payments can be made via net banking, debit card, or UPI. After payment, always download and save the challan receipt as proof of payment.
Penalties for Missing the Deadline
Failing to pay the required amount by the due date has financial consequences. The Income Tax Act includes provisions for interest penalties. If you fall short of paying the cumulative 45% by September 15, interest under Section 234C will be levied. This is calculated at 1% simple interest per month for a period of three months on the shortfall amount. Furthermore, if you haven't paid at least 90% of your total tax liability by the end of the financial year (March 31, 2027), an additional interest penalty under Section 234B at 1% per month will apply on the deficit from April 1, 2027, until the tax is fully paid.
