Advance Tax: Due Dates, Calculation, and Penalty for AY 2025-26
Advance tax must be paid in four instalments during the financial year. Missing instalments attracts interest under Sections 234B and 234C. Here is how to compute and pay advance tax.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
What Is Advance Tax?
Advance tax is the pay-as-you-earn mechanism under Sections 207–219 of the Income Tax Act, 1961. Instead of paying the entire year's tax liability at the end, taxpayers pay in four instalments during the financial year itself.
Who must pay advance tax? Any taxpayer (individual, firm, company) whose estimated tax liability for the year exceeds ₹10,000 after accounting for TDS — per Section 208.
Senior citizens (60+) without business income are exempt from advance tax under Section 207 — they pay only self-assessment tax while filing the return.
Advance Tax Due Dates (FY 2025-26 = AY 2026-27)
For taxpayers covered under presumptive taxation (Section 44AD, 44ADA, 44AE), advance tax is payable in one shot by 15 March (entire 100% in the 4th instalment).
How to Compute Advance Tax
- Estimate total income for the year: salary (from Form 16 Part A if mid-year), business income, capital gains, rental income, interest
- Apply deductions: 80C, 80D, HRA, home loan interest (only under old regime), standard deduction
- Compute tax: Apply slab rates + surcharge + 4% health and education cess
- Subtract TDS: Deduct expected TDS from employer and other deductors
- Remaining = advance tax payable: If > ₹10,000, pay in instalments
Interest for Non-Payment / Short Payment
Section 234B — Shortfall at Year End
If advance tax paid is less than 90% of the final assessed tax, interest at 1% per month (simple) is charged from 1 April until the date of filing / payment. Computed on the shortfall.Section 234C — Late/Short Instalment
Interest for each instalment that was not paid or was short:- 1% per month for 3 months on shortfall from 1st, 2nd, and 3rd instalments
- 1% per month for 1 month on shortfall from 4th instalment
Exception: No 234C interest if shortfall is due to capital gains or speculative income that arose after the instalment due date — you pay the entire liability by 15 March or 31 March.
Paying Advance Tax
- Visit incometax.gov.in → e-Pay Tax
- Select Challan ITNS 280
- Select "Advance Tax" (code 100) — not self-assessment tax (300)
- Enter assessment year: 2026-27 (for FY 2025-26 payments)
- Pay via net banking, debit card, or RTGS
- Download the counterfoil and keep it for your records
Revised Estimate Mid-Year
If your income estimate changes significantly (large capital gain, business downturn, salary revision), recalculate and adjust subsequent instalments. You are not penalised for adjusting estimates — 234C applies only on shortfall in the cumulative percentage by each due date.
We set up advance tax reminders and compute instalments for all our business clients as part of the annual tax management package. Get started →
Frequently Asked Questions
Who is required to pay advance tax?
Any taxpayer — individual, firm, or company — whose estimated tax liability for the year exceeds ₹10,000 after accounting for TDS must pay advance tax under Section 208. Senior citizens (60+) without business or professional income are exempt under Section 207.
What are the advance tax due dates for FY 2025-26?
The four instalments are: 15 June 2025 (15% cumulative), 15 September 2025 (45%), 15 December 2025 (75%), and 15 March 2026 (100%). Taxpayers under presumptive taxation (Sections 44AD/44ADA/44AE) can pay the entire amount in a single instalment by 15 March.
What is the penalty for not paying advance tax on time?
Interest under Section 234C at 1% per month is charged for each instalment that is short or late. Additionally, Section 234B charges 1% per month on the shortfall if total advance tax paid is less than 90% of the assessed tax, from 1 April until the date of filing.
How do I calculate advance tax if my income is unpredictable?
Estimate total income from all sources, apply applicable deductions and slab rates, subtract expected TDS, and pay the balance in instalments. If your estimate changes during the year, adjust the remaining instalments upward. Under-estimation is common — the key is that total advance tax by 15 March should cover at least 90% of final liability to avoid Section 234B interest.
Does advance tax apply to capital gains that arise suddenly?
Yes, but with relief. If a capital gain arises after a particular instalment due date, you can include it in the next instalment without incurring Section 234C interest for prior instalments. For example, a capital gain in October can be covered in the 15 December instalment.
I'm CA Harun Raaj, Visakhapatnam. If any of this affects you or your business, reach out — I'd be glad to help.
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See Also
Frequently Asked Questions
What is the advance tax due date for the second instalment in FY 2025-26?+
The second instalment of advance tax for FY 2025-26 (AY 2026-27) is due on 15 September 2025, with a minimum cumulative payment of 45% of the total estimated tax liability as per the due dates table in the article.
Are senior citizens required to pay advance tax under the Income Tax Act?+
Senior citizens aged 60 and above without business income are exempt from advance tax under Section 207 of the Income Tax Act, 1961. They are only required to pay self-assessment tax while filing their return.
How is interest calculated for short payment of advance tax instalments under Section 234C?+
Under Section 234C, interest is charged at 1% per month (simple interest) on the shortfall of each instalment for 3 months from the due date for the 1st, 2nd, and 3rd instalments, and 1% per month for 1 month on shortfall from the 4th instalment, as detailed in the article.
When must taxpayers under Section 44AD pay advance tax?+
Taxpayers covered under presumptive taxation schemes including Section 44AD, 44ADA, and 44AE must pay advance tax in one lump sum by 15 March (the 4th instalment date) rather than in quarterly instalments, as specified in the article.
What is the minimum tax liability threshold to trigger advance tax payment requirement?+
Any taxpayer whose estimated tax liability for the year exceeds ₹10,000 after accounting for TDS must pay advance tax, as per Section 208 of the Income Tax Act mentioned in the article.
What interest is charged if advance tax paid is less than 90% of final assessed tax?+
Under Section 234B, if advance tax paid is less than 90% of the final assessed tax, interest at 1% per month (simple) is charged on the shortfall from 1 April until the date of filing or payment, as explained in the article.
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