Advance Tax for F&O Profits While Salaried: Instalments and Interest u/s 234B/234C
Advance tax applies when estimated tax liability exceeds ₹10,000 after TDS. Salaried employees have salary covered by employer TDS, but F&O profits are not — on the ₹4 lakh F&O slice (which straddles the 20% and 25% new-regime slabs for FY 2025-26), Deepak's incremental advance tax works out to about ₹80,500 across four instalments (15 Jun, 15 Sep, 15 Dec, 15 Mar). Missing instalments triggers interest under Sections 234B and 234C.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Short answer: Advance tax is payable when your estimated tax liability for the year exceeds ₹10,000 after TDS credit (s.208 ITA 1961). A salaried employee's TDS covers salary, but F&O profits carry no TDS, so they push you into advance tax. On a net F&O profit of ₹4 lakh, at an effective 30% slab, Deepak owes about ₹1.2 lakh, payable in four instalments — 15% by 15 June, 45% by 15 Sep, 75% by 15 Dec, 100% by 15 Mar (s.211). Undershooting an instalment costs 1% per month interest under s.234C, and paying less than 90% of the assessed tax by year-end costs 1% per month under s.234B.
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The instalment schedule
F&O traders do not qualify for the single-instalment-by-15-March relaxation (that is for s.44AD/44ADA/44AE eligible assessees; F&O is excluded from 44AD). The four-instalment schedule applies.
How the salaried + F&O case works
Your salary is covered by employer TDS under s.192. Your F&O business income is not — there is no withholding on trading profits. So:
Advance tax payable = tax on (salary + F&O profit + other income) − TDS already deducted − any other prepaid tax.
If this balance exceeds ₹10,000, advance tax is due. The instalment percentages apply to the total advance tax for the year, not just the F&O portion.
The interest rules
Section 234C (per-instalment): if an instalment falls short, interest is charged at 1% per month (simple) on the shortfall:
- For the June, September and December instalments: for 3 months each;
- For the March instalment: for 1 month.
Section 234B (year-end): if the total advance tax paid is less than 90% of the assessed tax, interest at 1% per month runs from 1 April of the assessment year on the shortfall between assessed tax and advance tax paid.
Both are simple interest, but they stack — a missed December instalment plus a <90% year-end position can add materially to the bill.
Worked example: Deepak's advance tax
Persona: Deepak, salaried, FY 2025-26. Salary ₹18,00,000 — employer deducts TDS ₹1,60,000 (computed on salary alone). F&O net profit ₹4,00,000. No other income. He files under the new regime (default).
Step 1 — Total income: ₹18,00,000 + ₹4,00,000 = ₹22,00,000.
Step 2 — New-regime tax on ₹22,00,000 (FY 2025-26 slabs, after standard deduction ₹75,000):
- Taxable income after standard deduction: ₹21,25,000
- Tax (approx. slabs: 5% on 4–8L, 10% on 8–12L, 15% on 12–16L, 20% on 16–20L, 25% on 20–24L):
- 0–4L: nil
- 4–8L: ₹20,000
- 8–12L: ₹40,000
- 12–16L: ₹60,000
- 16–20L: ₹80,000
- 20–21.25L: ₹31,250 (25%)
- Total: ₹2,31,250 + cess 4% ≈ ₹2,40,500
Step 3 — Advance tax payable: ₹2,40,500 − ₹1,60,000 (TDS) = ₹80,500.
Step 4 — Instalments (₹80,500 × %):
- 15 June: 15% = ₹12,075
- 15 Sep: 45% = ₹36,225 (cumulative)
- 15 Dec: 75% = ₹60,375 (cumulative)
- 15 Mar: 100% = ₹80,500 (cumulative)
If Deepak pays nothing until March, the June/Sept/Dec shortfalls attract s.234C interest at 1% per month on each shortfall. If he pays only ₹60,000 by year-end, s.234B interest also runs on the shortfall (90% of ₹80,500 ≈ ₹72,450; ₹60,000 < ₹72,450 → s.234B bites).
The planning note: had Deepak sold nothing until December, he can still pay 75% by 15 December and the balance by 15 March to minimise s.234C exposure on the early instalments — advance tax on income arising later in the year is judged on what was estimable at each instalment date.
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Paying the instalments: mechanics and challan codes
Advance tax is paid on the e-filing portal (e-Pay Tax → Advance Tax) or through any authorised bank using challan ITNS 280. The codes matter:
You can pay each instalment separately or pay a larger amount later — the system tracks cumulative paid-to-date and the s.234C calculation runs on the instalment shortfalls, not on your payment count. Keep the challan copy or the portal acknowledgment for Form 26AS and your records.
If your F&O result changes mid-year
Advance tax is a running estimate, not a lock-in. If you booked losses early and your profit estimate falls, you are not obliged to pay the originally projected instalments — s.234C is judged on what was estimable at each instalment date. Conversely, if a profitable December causes a late-year spike, the March instalment absorbs it: bring the cumulative total to 100% of the revised estimate by 15 March. The system and the AO both evaluate the instalment shortfalls against the income actually accruing in each period, which is why documented mid-year revisions protect you from interest.
Frequently Asked Questions
1. Do salaried employees with F&O income need to pay advance tax?
Yes, if the total tax liability after TDS exceeds ₹10,000. Salary is covered by TDS, but F&O profits are not, so the uncovered tax on the F&O profit falls into advance tax.
2. What happens if I miss an advance tax instalment?
Interest under s.234C at 1% per month applies on the shortfall for each missed instalment — 3 months for the June, September and December instalments, 1 month for the March instalment.
3. Is there a 90% rule for advance tax?
Yes. If total advance tax paid is less than 90% of the assessed tax, interest under s.234B at 1% per month runs from 1 April of the assessment year.
4. Can I pay all my advance tax in the March instalment?
You can pay, but the earlier instalments are treated as short and attract s.234C interest. The schedule is cumulative: 15%, 45%, 75%, 100%.
5. How do I pay advance tax?
On the e-filing portal: e-Pay Tax → Advance Tax, or via any authorised bank using challan ITNS 280 (advance tax). Choose Major head 0021 (Income Tax — for individuals; a company would pick 0020, Corporation Tax) and Minor head 100 (advance tax). Any surcharge and cess go inside the amount columns of the same challan — there is no separate major head for surcharge.
6. Do F&O traders get the 15-March single-instalment rule?
No. That relaxation is for s.44AD/44ADA/44AE eligible assessees. F&O is excluded from 44AD, so the regular four-instalment schedule applies.
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Compute your advance tax before the instalment dates
Use the Advance Tax Calculator — enter salary, TDS, and F&O profit, and it computes the four instalments plus the s.234B/234C exposure if you fall short. Set reminders for 15 June, 15 September, 15 December and 15 March.
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Last verified: 2026-08-08.
Sources: Sections 192, 208, 211, 234B, 234C ITA 1961; Finance (No. 2) Act, 2024 (new-regime slabs, FY 2025-26); challan ITNS 280.
Reviewer: pending CA sign-off. Draft status — do not publish before CA review.
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