What Is Advance Tax and Who Should Pay It?
Advance tax is essentially a 'pay-as-you-earn' system for income tax. Instead of paying a lump sum at the end of the year, the Income Tax Act requires you to pay your taxes in instalments throughout the financial year in which you earn the income. This
applies to any taxpayer—salaried individuals, freelancers, and business owners—whose estimated net tax liability for the financial year is ₹10,000 or more. This liability is calculated after accounting for any Tax Deducted at Source (TDS) or Tax Collected at Source (TCS). For instance, if you are a salaried employee but have significant additional income from rent, capital gains, or freelance work not fully covered by your employer's TDS, you are required to pay advance tax. The only 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.
Calculating Your September 15 Instalment
The Income Tax Department has set a clear schedule for advance tax payments. For the financial year 2026-27, the second instalment is due on September 15, 2026. By this date, you must have paid a cumulative total of at least 45% of your total estimated tax liability for the year. This includes the first instalment paid in June. The instalment schedule is as follows: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15. To calculate your payment, you must first estimate your total income from all sources for the entire financial year (April 1, 2026, to March 31, 2027). Then, calculate the total tax payable on this income according to your applicable slab rate. From this total tax amount, subtract any TDS/TCS that has already been deducted or will be deducted. If the remaining amount is over ₹10,000, that is your advance tax liability. For the September 15 deadline, ensure that the total amount paid so far is at least 45% of this liability.
How to Pay Your Advance Tax Online
Paying your advance tax online is the most convenient method. The process is handled through the official e-Filing portal of the Income Tax Department. Here’s a step-by-step guide: First, visit the Income Tax e-Filing portal and find the 'e-Pay Tax' option, which is accessible under 'Quick Links' on the homepage. You will be prompted to enter your PAN and mobile number, followed by an OTP for verification. Once your PAN is verified, you will proceed to a new payment page. Here, you must select 'Income Tax'. You will then need to choose the Assessment Year (for income earned in FY 2026-27, the AY is 2027-28) and the 'Type of Payment', which should be selected as 'Advance Tax (100)'. In the next step, you will break down the payment into its components like Tax, Surcharge, and Cess. After filling in the amounts, you can choose your preferred payment method, which includes net banking, debit card, UPI, or RTGS/NEFT. After a final review, complete the payment.
Recording Your Payment and Verification
Once your payment is successful, a challan receipt will be generated. This receipt contains a crucial piece of information: the Challan Identification Number (CIN), which includes the BSR code of the bank branch, the date of deposit, and the challan serial number. It is essential to download and save this receipt as proof of payment. The payment will typically reflect in your Form 26AS (Annual Tax Statement) and Annual Information Statement (AIS) within a few days. You should log in to the e-filing portal to check your 'Payment History' or Form 26AS to confirm that the tax has been credited to your PAN. This step is vital for ensuring your records are accurate and will be needed when you file your Income Tax Return (ITR), as you must report the details of all advance tax payments made during the year.
Consequences of Missing the Deadline
Failing to pay or underpaying your advance tax instalments attracts interest penalties under the Income Tax Act. If you pay less than the mandated cumulative amount by the due dates, interest under Section 234C is levied at 1% simple interest per month (or part of a month) on the shortfall amount. For the September 15 deadline, if your cumulative payment is less than 45% of your total liability, interest will be charged for three months on the deficit. Furthermore, if you pay less than 90% of your total assessed tax liability as advance tax by the end of the financial year (March 31), an additional interest under Section 234B is charged at 1% per month from April 1 of the following year until the tax is fully paid. These interest charges are mandatory and cannot be waived, making timely compliance essential to avoid unnecessary financial costs.
