Most salaried employees never think about advance tax because their employer deducts TDS every month, effectively paying it on their behalf. But the moment you have income beyond your salary, freelance work, rental income, capital gains from selling property or stocks, or significant interest income, the responsibility for paying tax in advance, not just at year-end, shifts to you.
Who Is Required to Pay Advance Tax
Anyone whose total tax liability for the year, after TDS already deducted, exceeds ₹10,000 is required to pay advance tax. This threshold is low enough that it catches far more people than expect it, freelancers, consultants, landlords with rental income, anyone who sold property or stocks for a meaningful gain, and salaried employees with substantial side income that isn't subject to TDS.
Senior citizens (60 years or older) without any business or professional income are exempt from advance tax, even if their overall liability exceeds ₹10,000. This exemption doesn't apply to senior citizens who do have business or professional income.
The Four Deadlines for FY 2025-26
| Due Date | Cumulative Tax to Be Paid |
|---|---|
| June 15, 2026 | 15% of estimated annual tax liability |
| September 15, 2026 | 45% of estimated annual tax liability |
| December 15, 2026 | 75% of estimated annual tax liability |
| March 15, 2027 | 100% of estimated annual tax liability |
Each deadline is cumulative, meaning by September 15 you should have paid 45% of the total for the year, not an additional 45% on top of the first instalment. If you're covered under the presumptive taxation scheme (Section 44AD or 44ADA), you get a single deadline of March 15 to pay 100%, rather than four separate instalments.
What Happens If You Miss a Deadline
Two separate interest charges apply, and they're easy to confuse.
Section 234B applies if you've paid less than 90% of your total tax liability by March 31. Interest is charged at 1% per month (or part of a month) on the shortfall, calculated from April 1 until you actually pay.
Section 234C applies specifically to missing or underpaying any of the four quarterly instalments, even if you eventually pay the full amount by year-end. Interest is charged at 1% per month for a period of 3 months for each of the first three instalments you underpaid, and 1 month for the final instalment.
These aren't small penalties for someone with a substantial tax liability. On a ₹5 lakh shortfall carried for several months, the combined interest under both sections can run into tens of thousands of rupees, money that a bit of quarterly planning avoids entirely.
How to Estimate Your Advance Tax If Your Income Is Irregular
This is the genuine challenge for freelancers and business owners: you're paying tax on income you're still earning, and estimating it wrong either ties up cash you need or triggers interest charges. A practical approach: estimate conservatively for the first instalment based on your prior year's income, then true up the estimate for subsequent instalments as you get better visibility into the actual year's earnings. Slightly overpaying by the December instalment is far cheaper than the compounding interest from underpaying.
Use our advance tax calculator to work out your instalment amounts based on your estimated annual income, and our salary tax calculator if you need to separate your salary tax liability from other income sources first.
How to Actually Pay
Advance tax is paid online through the Income Tax Department's e-filing portal or authorised bank websites, using Challan 280. Keep the payment receipt (BSR code, challan serial number, date) since you'll need these details when filing your ITR to claim credit for the advance tax already paid.
Frequently Asked Questions
I'm salaried but also earn ₹15,000 a month from freelance writing. Do I need to pay advance tax?
Possibly, depending on your total tax liability after existing TDS. Your employer's TDS covers your salary income but not your freelance income. If the tax due on your freelance earnings, combined with any shortfall from your salary TDS, exceeds ₹10,000 for the year, you're required to pay advance tax on the difference.
What if I sold a property in December and have a large capital gain, but the year is nearly over?
You're still required to pay advance tax on that gain by the next applicable instalment date after the sale, generally the December 15 or March 15 deadline depending on timing, calculated proportionately. Section 234C has specific relief provisions for capital gains that arise late in the year, since you couldn't have reasonably estimated them earlier, consult a CA to apply this correctly.
Can I pay all four instalments as a lump sum in March instead of quarterly?
You can, but you'll owe interest under Section 234C for the earlier missed instalments even if the year-end total is fully paid. Paying on the quarterly schedule, even in approximate amounts, avoids this interest entirely.
Does advance tax apply to GST-registered businesses in addition to their GST liability?
Yes, advance tax under the Income Tax Act is entirely separate from GST. A business pays GST on its taxable supplies throughout the year and separately pays advance income tax on its profit, these are two distinct tax obligations with different rules and deadlines.
