Moment guide · FY 2026-27

I am taking a sabbatical or career break

What tax do I pay on investment income during a sabbatical?

Sec 80DSec 80CCD(1B)Sec 234CSec 194ASec 80TTAVerified 2026-08-11

A sabbatical does not suspend your tax obligations: interest and other investment income remain taxable, and without employer TDS you must pay advance tax in quarterly instalments if your liability exceeds ₹10,000. Deductions like 80D health premiums and the extra ₹50,000 NPS 80CCD(1B) keep working in the old regime on your remaining income. If your income is below the exemption limit, file Form 15G/15H with banks to stop TDS on interest.

Your legitimate options

Every route the statute actually gives you — with its condition, cap and deadline.

Route	Condition	Cap / deadline
Advance tax on investment income	No employer TDS during the break — pay advance tax by 15 June/15 Sep/15 Dec/15 Mar if liability exceeds ₹10,000	Interest u/s 234C for late instalments
Deductions still available	80D health premiums, 80CCD(1B) NPS extra ₹50k and 80C investments remain claimable on other income in the old regime	Old regime only for most Chapter VI-A deductions
Form 15G/15H	Income below the exemption limit — file 15G (below 60) or 15H (senior) with banks so no TDS is cut on interest	Only for residents below the taxable threshold; interest still reported in AIS

The #1 trap

Assuming the sabbatical means no tax filing or payments at all. Your investment income still accrues, and with no employer deducting TDS you owe advance tax in quarterly instalments or face interest under sections 234B/234C. Health insurance and NPS deductions continue to work in the old regime, so keep claiming them on your remaining income.

The decision path

Follow it top to bottom — the first condition that matches is your answer.

IF your tax liability after TDS exceeds ₹10,000 during the break → pay advance tax by 15 June, 15 Sep, 15 Dec and 15 Mar.
IF you have health insurance premiums → keep claiming 80D in the old regime on your other income.
IF you contribute to NPS Tier 1 → the extra ₹50,000 under 80CCD(1B) remains claimable in the old regime.
IF your income is below the exemption limit → file Form 15G (or 15H as a senior) with each bank to avoid TDS on interest.
IF you miss an advance-tax instalment → interest under section 234C applies even if you pay at filing. [VERDICT: the break pauses salary, not your tax calendar.]

Worked example

Ishaan, product manager on a six-month sabbatical

Ishaan left his job in June for a six-month sabbatical, with no salary from July onward. His only income is interest: ₹1,80,000 from fixed deposits and ₹90,000 from his savings account, totalling ₹2,70,000. Since no employer deducts TDS on this income, his liability is not automatically collected. His total income for the year, assuming no other earnings, is ₹2,70,000, which in the old regime falls below the basic exemption limit once he claims deductions, so he files Form 15G with both banks and no TDS is deducted on his interest. If he also had rental income of ₹4,00,000, his total income would be ₹6,70,000, and with the old regime's standard deduction unavailable to him (he has no salary), he would owe advance tax. His estimated liability of roughly ₹30,000 exceeds ₹10,000, so he must pay it in instalments by 15 June, 15 September, 15 December and 15 March — 15% by June, 45% by September, 75% by December and 100% by March. Missing the December instalment attracts interest under section 234C at 1% per month on the shortfall. During the break he continues paying his health insurance premium of ₹25,000 and claims it under section 80D in the old regime, and he tops up NPS Tier 1 by ₹50,000, claiming the extra 80CCD(1B) deduction even with no salary income. His EPF contributions stop because there is no employer, but his PPF and NPS contributions keep earning interest. Ishaan files his ITR by 31 July and reconciles the interest shown in his AIS with the 15G declarations he submitted. A quick call with us dials in the final figure. Ishaan also reviews his portfolio for income that does not appear in any TDS statement: interest on his savings account below the TDS threshold, dividends from shares and any capital gains from mutual fund redemptions during the break. These must all be declared in the return, because the AIS will show them even if no tax was deducted. If he sells a fund for a gain of ₹40,000 during the sabbatical, the gain is reported in the capital gains schedule and the LTCG exemption of ₹1.25 lakh under section 112A protects it if it is equity. A quick call with us dials in the final figure.

Claims influencers make about this moment

Partly true“Submit Form 15G/15H to the bank and your FD interest becomes completely tax-free.”

Questions people actually ask

Do I need to pay advance tax during a sabbatical?

Yes, if your tax liability after TDS exceeds ₹10,000. Without employer TDS, pay quarterly instalments by 15 June, 15 Sep, 15 Dec and 15 Mar to avoid interest under sections 234B/234C.

Can I still claim 80D and NPS deductions with no salary?

Yes — 80D health premiums and the extra ₹50,000 80CCD(1B) NPS deduction remain available in the old regime against your other income.

How do I stop TDS on interest during a break?

File Form 15G (below 60) or 15H (60 and above) with each bank when your income is below the exemption limit. The interest still appears in your AIS.

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Sections: 80D, 80CCD(1B), 234C, 194A, 80TTA · Last verified 2026-08-11 · Reviewed by Harun Raaj & Associates, Chartered Accountants. Every figure cites the Income-tax Act, 1961 (with ITA 2025 mapping via our section index).