Advance tax is the ‘pay-as-you-earn’ income tax paid in instalments during the year rather than as a lump sum at year-end. It applies when your tax liability after TDS is Rs 10,000 or more. This guide explains who must pay advance tax, the quarterly instalment schedule and the interest for shortfall.
Advance Tax (also known as the “Pay-As-You-Earn” scheme) is the income tax paid during the same financial year in which income is earned, instead of paying a lump sum at year-end. It ensures taxpayers pay tax progressively as they earn income throughout the year.
Who Should Pay Advance Tax?
Any taxpayer whose estimated tax liability is ₹10,000 or more (after TDS/TCS deduction) in a financial year must pay advance tax:
Taxpayers Required to Pay:
| Category | Details |
| Salaried individuals | Only if they have additional income (interest, dividends, house property, capital gains) creating tax liability ≥ ₹10,000 after TDS |
| Businesses & professionals | Self-employed, freelancers, consultants with tax liability ≥ ₹10,000 |
| HUF, AOP, BOI, Companies, Firms | All entities with tax liability ≥ ₹10,000 |
| NRIs | With income sources in India and tax liability ≥ ₹10,000 |
| Presumptive taxpayers | Under the new prescriptive tax scheme with tax liability ≥ ₹10,000 |
Who Is Exempt?
| Exemption |
| Senior citizens (age 60+) who are resident Indians without business/professional income |
When to Pay: Due Dates & Instalments
Advance tax must be paid in instalments during the financial year. The schedule differs based on whether you opt for presumptive taxation:
For Most Taxpayers (Non-Presumptive under New Prescriptive Tax Scheme):
| Due Date | Minimum % Payable | Cumulative % |
| June 15 | 15% of total tax | 15% |
| September 15 | 45% of total tax | 45% |
| December 15 | 75% of total tax | 75% |
| March 15 | 100% of total tax | 100% |
For Presumptive Taxpayers:
| Due Date | Minimum % Payable |
| March 15 | 100% of total advance tax |
Note: Payments made by March 31 are treated as advance tax.
How Much to Pay?
Calculation Steps:
1. Estimate total income for the financial year
2. Calculate total tax liability on that income
3. Subtract TDS/TCS already deducted
4. Pay advance tax if balance ≥ ₹10,000
Formula:
If the result is ₹10,000 or more, you must pay advance tax.
How to Pay Advance Tax
Advance tax can be paid online using Challan ITNS 280:
Payment Methods:
· Internet banking (via authorized banks)
· Debit card
· Authorized banks (physical challan)
Online Payment Process:
1. Visit the Income Tax e-Filing portal
2. Select “e-Pay Tax” (Challan 280)
3. Choose “Advance Tax” as the payment type
4. Enter assessment year and amount
5. Complete payment via net banking/debit card
Mandatory e-payment for:
· Companies
· Taxpayers requiring tax audit under the new audit provisions
Interest Penalty for Non-Compliance
Interest on Shortfall of Advance Tax:
· If advance tax paid is less than 90% of total tax liability by March 31
· Interest: 1% per month on the shortfall
Interest on Deferred Instalments:
· If instalments payments are delayed or underpaid
· Interest: 1% per month on the deferred amount for each missed instalment
Key Takeaways
| Aspect | Requirement |
| Threshold | Tax liability ≥ ₹10,000 after TDS |
| Due dates | June 15 (15%), Sep 15 (45%), Dec 15 (75%), Mar 15 (100%) |
| Payment mode | Challan ITNS 280 (online) |
| Presumptive scheme | 100% by March 15 only |
| Exemption | Senior citizens 60+ without business income |
| Penalty | 1% monthly interest on shortfall and deferred installments. |
Advance tax ensures the government receives tax revenue throughout the year while helping taxpayers avoid large year-end lump-sum payments and interest penalties.
Frequently Asked Questions
Who has to pay advance tax?
Any taxpayer whose tax liability after TDS is Rs 10,000 or more in a financial year.
What are the advance tax due dates?
15 June, 15 September, 15 December and 15 March, in the prescribed cumulative percentages.
Is there interest for not paying advance tax?
Yes, interest under Sections 234B and 234C applies for non-payment or short payment.
Are senior citizens exempt?
Resident senior citizens without business or professional income are exempt from advance tax.
