Advance Tax: Who Pays, When, and Why I See It as Cash Planning

Due Dates and Instalment Percentages

Advance tax is spread across four instalments through the financial year, and the percentages are cumulative milestones, not four equal slices. By each date, the total advance tax paid so far should reach the percentage shown.

Read it as a staircase: by 15 September you should have paid 45% in total, not an additional 45%. So if you paid 15% in June, you top up another 30% in September to reach the 45% mark.

These dates apply for FY 2026-27 (tax year 2026-27 in the vocabulary of the Income-tax Act, 2025) exactly as shown. A common mistake is to assume advance tax is due at the end of the financial year. It is not: the bulk of it must be paid well before March. Falling short of a milestone is what triggers interest under Section 234C, although the June and September dates carry a small tolerance, explained in the interest section below.

Presumptive Taxation: One Instalment by 15 March

Presumptive taxpayers are different. If you compute income under Section 44AD (eligible small businesses with turnover up to ₹2 crore, or ₹3 crore where cash receipts stay within 5% of turnover) or Section 44ADA (eligible professionals with gross receipts up to ₹50 lakh, or ₹75 lakh under the same 5% cash condition), you do not follow the four-instalment ladder:

• You can pay your entire advance tax in a single instalment by 15 March, and you are not charged 234C interest for skipping the June, September and December instalments. One estimate, one payment, once a year.
• The deadline is 15 March, not 31 March.
• If you miss the 15 March deadline, Section 234B interest applies from 1 April.

This is a genuine simplification, and one of the quieter attractions of the presumptive route for those who qualify.

Note on section numbers: the Income-tax Act, 2025 (effective 1 April 2026) consolidated Sections 44AD and 44ADA into Section 58 (confirmed against the Income Tax Department's official transition FAQ and the Act's own text), with the same 50%/8%/6% rates and thresholds. The turnover limits and single-instalment rule above are unchanged. This guide keeps the familiar 1961-Act names since they remain in common use.

Capital Gains, Dividends and Other Income You Cannot Predict

Capital gains are the trickiest part of advance tax because you often cannot predict them. You might sell shares in November that you had no plan to sell in June.

The law recognises this. You are not expected to forecast capital gains or dividend income in advance. Instead, the tax on such income is added to the instalment falling due after the income arises. If you book a capital gain on 20 November, the tax on it is included in your 15 December instalment (and the following March one). You will not be charged 234C interest for not having predicted it in the June or September instalments. The same relief applies to dividend income and to winnings, which means a one-off equity sale in February only needs to be covered in your March instalment. Capital gains that arise after 15 March, in the last days of the financial year (16 to 31 March), can be paid by 31 March without triggering Section 234C interest.

For example, you sell equity shares in July 2026 for a gain of ₹5,00,000. Tax on ₹3,75,000 taxable LTCG (₹5L − ₹1.25L exemption) at the 12.5% rate = ₹46,875, before cess. This triggers advance tax for the September and December instalments.

The most common advance tax failure for investors runs the other way: a large equity redemption or property sale in July creates a substantial capital gains tax liability, the taxpayer doesn't pay advance tax in September or December, and pays only at ITR filing time the following year. The result is Section 234C interest for September and December, and Section 234B interest from April to the payment date. On a ₹1 lakh capital gains tax liability paid in July, the 234B part alone is ₹4,000 (April–July = 4 months). The discipline is simple: when you realise a large gain in Q1 or Q2, note the approximate tax and pay advance tax in the next quarterly instalment. If you sell property, consult a CA immediately, as the advance tax implications can be significant and the 15 March deadline doesn't wait. For more on how these gains are taxed, see our guide to capital gains tax in India.

Estimating Your Advance Tax Liability

You do not need a perfect forecast. You need a reasonable one, refreshed each quarter as the year unfolds. The method is the same for everyone; what changes by situation is which income slips past TDS and how much of it there is.

The Calculation, Step by Step

1. Estimate your annual income from all sources.
   • Salary income: Your projected annual salary, minus the standard deduction (₹75,000 under the new regime, ₹50,000 under the old) and, on the old regime, your HRA exemption.
   • Business or professional income: Expected net profit for the year. For a business, that means projecting full-year profit from the months you can already see.
   • Rental income: Net annual rent received, minus 30% standard deduction (the flat deduction allowed on rental income for maintenance), minus property tax paid.
   • Interest income: Savings account interest, FD interest and bond interest: the total amount expected for the year.
   • Capital gains: If you've already sold investments during the year and know the gains, include those. Future capital gains are harder to estimate, so include them as they arise and adjust later quarters. Short-term capital gains (STCG) on equity are taxed at 20%; long-term capital gains above ₹1.25 lakh at 12.5%. Budget 2024 set these rates, and they continue unchanged for FY 2026-27. They have their own tax rates that stack on top of your regular income tax. For short-term capital gains on property (held under 2 years), the full gain is taxable at slab rates.
   • Agricultural income over ₹5,000: Agricultural income is partially exempt but still affects the rate at which other income is taxed. The partial integration rules mean you need to compute tax correctly.
2. Subtract the deductions you are entitled to (on the old regime, 80C, 80D, 80CCD(1B), 24(b) and others) to arrive at taxable income.
3. Calculate tax on the taxable income using the applicable slab rates (old or new regime), and add the applicable cess.
4. Subtract TDS/TCS already deducted or expected to be deducted by your employer, your clients, and banks on FD interest.
5. Check whether the balance is ₹10,000 or more. If it is, that balance is your advance tax, paid across the four instalment dates.

Because your income estimate firms up over the year, you revise the figure at each due date. By 15 March you have near-complete visibility, so the final instalment trues everything up to 100%. For a precise estimate on a complex income mix, a CA's number beats a rough one. If you would rather keep the estimate in a sheet you revise at each due date, I made the Income Tax Planner for 2026-27, my own Google Sheets template with an advance-tax schedule that tracks each instalment as due, paid or short. It's ₹999 on Gumroad.

Old Regime or New Regime

The advance tax calculation mechanics are the same under both old and new regimes; the difference is only in which deductions you apply when estimating your annual tax liability. The quarterly payment percentages are the same regardless of regime.

New regime advance tax estimate:

• Gross income from all sources
• Less: ₹75,000 standard deduction (salaried)
• Less: 80CCD(2) employer NPS if applicable
• Apply new regime slabs
• Less TDS already deducted/expected
• If balance is ₹10,000 or more: advance tax required

Old regime advance tax estimate:

• Same gross income
• Less standard deduction ₹50,000
• Less HRA exemption
• Less all Chapter VI-A deductions (80C, 80D, 24(b), etc.)
• Apply old regime slabs
• Less TDS
• If balance is ₹10,000 or more: advance tax required

Old regime advantages: Allows deductions under 80C (up to ₹1.5 lakh), 80D (health insurance), HRA, LTA, home loan interest, and others. It wins only when you have a large stack of these to claim, and since the Budget 2025 slabs (retained for FY 2026-27) that stack has to be larger than it used to be.

New regime advantages: Wider slabs, no deduction tracking required, and it is the default regime under the Income-tax Act, 2025. Under the FY 2026-27 slabs, tax is nil up to ₹12 lakh of taxable income thanks to the Section 87A rebate of ₹60,000. The ₹75,000 standard deduction is a salary deduction, so a pure freelancer on 44ADA doesn't get it: the nil-tax point for you is ₹12 lakh, not the ₹12.75 lakh a salaried reader will have seen quoted.

The choice of regime is made when you file your ITR, but you should estimate with it from the start. Calculate both scenarios in April–May, choose the regime that results in lower tax, and use that for all four quarterly payments. Do not switch regimes mid-year in your estimates; it makes reconciliation at filing time needlessly complicated. If you are unsure which regime suits you, our old vs new tax regime guide walks through the trade-offs.

TDS, Form 26AS and AIS

Advance tax liability is net of all TDS that has been or will be deducted in the year: more TDS deducted on your income means less advance tax to pay yourself. The catch is how patchy TDS is on anything other than salary.

• Salary: Your employer estimates your annual tax and deducts it evenly across twelve months. This is usually accurate, especially if you declared your investments. No gap here.
• Freelance or professional fees: Clients deduct TDS at 10% under Section 194J (renumbered Section 393 under the Income-tax Act, 2025, effective 1 April 2026, with the same rate) if they are businesses, but many small clients deduct nothing. Even where TDS is deducted, 10% is often far below your actual marginal rate of 20% or 30%. The shortfall is yours to pay.
• Interest income: Banks deduct TDS at 10% on fixed deposit interest above ₹50,000 a year from a single bank (₹1,00,000 for senior citizens; both thresholds were raised with effect from 1 April 2025), but savings account interest has no TDS, and again 10% rarely matches your real rate. We cover this in detail in our guide to tax on FD and savings account interest.
• Rental income: Tenants who are individuals usually deduct no TDS. A company or firm tenant deducts TDS under Section 194I once the rent it pays you crosses ₹6 lakh a year (₹50,000 a month). An individual or HUF tenant not under tax audit deducts under Section 194IB instead, at 2%, above the same ₹50,000-a-month mark. So most rent arrives untaxed.
• Dividends: Companies deduct 10% TDS on dividends above ₹10,000 from a single company (raised from ₹5,000 with effect from 1 April 2025). If you are in the 30% bracket, two-thirds of the tax is still outstanding.
• Capital gains: No TDS at all on gains from selling shares, mutual funds or property (except the buyer's 1% on property worth ₹50 lakh or more). The entire tax on capital gains is your responsibility.

TDS on professional fees is deducted at a flat percentage on the gross fee, but your actual tax depends on your net profit and your slab. If your effective tax rate is higher than the TDS rate, there is a gap, and that gap is what advance tax fills. If you are a consultant whose income is heavily TDS-covered, your advance tax may be small; if much of your income comes from sources without TDS, it will be larger. For the receiving side of TDS, see TDS for Consultants, and the self-employed section below goes deeper on estimation.

Calculation check:

• Total estimated annual tax: ₹2,00,000
• Expected TDS from all sources: ₹1,85,000
• Advance tax payable: ₹2,00,000 − ₹1,85,000 = ₹15,000 (₹10,000 or more → advance tax required)

In this case, advance tax of ₹15,000 should be split across instalments:

• June: 15% = ₹2,250
• September: 45% cumulative = ₹6,750
• December: 75% cumulative = ₹11,250
• March: 100% = ₹15,000

Reconcile before each instalment. Check your Form 26AS and AIS (Annual Information Statement) on the income-tax portal before you compute. Clients who deduct TDS report it there. Subtract the TDS actually credited from your estimate, or you'll overpay. Catch any mismatch (a client deducted but didn't deposit) early, so you can chase it before filing.

The AIS covers more ground than Form 26AS. It aggregates information from multiple sources: banks (interest, dividends), brokers (mutual fund transactions, equity sales), registrars (property transactions), and any other party that files returns mentioning your PAN. Log in to incometax.gov.in, navigate to Services → Annual Information Statement, and review the draft AIS for the year-to-date. Look specifically for:

• Interest from fixed deposits: Banks report this to the IT department. If you've earned ₹80,000 across several FD accounts and only noticed the TDS certificate from one bank, the AIS will show all of them.
• Dividend income: Now fully taxable in the hands of the recipient. Dividend payouts from shares and mutual funds appear in AIS. If you haven't factored them into your advance tax estimate, you may be underpaying.
• Capital gains from mutual funds: Groww, Zerodha, and other platforms report redemption data. Long-term capital gains above ₹1.25 lakh and all short-term capital gains must be included in your advance tax estimate.
• Rental income: Check whether TDS under Section 194I or 194IB appears in AIS.

The AIS allows you to "accept" or "dispute" the entries. Dispute inaccurate entries early: a disputed entry that you don't respond to eventually becomes an IT department query.

Estimating Variable or Seasonal Income

Advance tax is comfortable when income is steady and predictable. It is harder when income is lumpy or seasonal: a consultant who lands one large project mid-year, a paddy or seed business whose trade bunches around the harvest, or a professional whose receipts arrive irregularly. The four-instalment ladder assumes you can foresee your full-year income from June onwards, which is not always realistic.

• Estimate conservatively early, true up later. In June and September, base your instalment on a reasonable projection of the income you can already see, and pay slightly more in June to avoid the minimum threshold issue. As the year unfolds and a big project or season materialises, raise your December and March instalments to catch up to the cumulative milestones. The system tolerates revising upward; what it penalises is sustained underpayment.
• Treat each large receipt as a tax event. When an unusually big payment lands, immediately set aside its tax portion. This stops a strong quarter from becoming a March scramble and keeps your instalments funded from the income that created the liability.
• Review before the last two instalments. Don't wait for the 15 March deadline to discover you owe a large amount. Review your income position in October (before the December instalment) and again in January (before finalising March). Surprises at filing time usually mean interest has already accrued.

Salaried People With Side Income

A worked example: salary plus freelancing. Take a marketing manager in Bengaluru. His situation for FY 2026-27:

• Salary: ₹14,00,000, on which his employer deducts TDS of ₹1,30,000 across the year
• Freelance design work: ₹4,00,000, with ₹40,000 TDS deducted by one corporate client under 194J
• FD interest: ₹60,000, with ₹6,000 TDS deducted by the bank

He has opted out of the new regime (the default under the Income-tax Act, 2025, so staying on the old regime is a choice he has to make actively) and claims ₹1,50,000 under Section 80C plus ₹50,000 in NPS.

Step 1, total income: Salary ₹14,00,000 + freelance ₹4,00,000 + interest ₹60,000 = ₹18,60,000.

Step 2, deductions: Standard deduction ₹50,000 + 80C ₹1,50,000 + 80CCD(1B) ₹50,000 = ₹2,50,000. Taxable income = ₹18,60,000 − ₹2,50,000 = ₹16,10,000.

Step 3, tax under old regime slabs:

• Up to ₹2.5L: Nil
• ₹2.5L–5L at 5%: ₹12,500
• ₹5L–10L at 20%: ₹1,00,000
• ₹10L–16.1L at 30%: ₹1,83,000
• Total: ₹2,95,500 + 4% cess = ₹3,07,320

Those are the current numbers: the Finance Act, 2026 carried the old-regime slabs, the ₹50,000 standard deduction and the 4% cess into tax year 2026-27 unchanged.

Step 4, subtract TDS already deducted: TDS total = ₹1,30,000 (salary) + ₹40,000 (freelance) + ₹6,000 (FD) = ₹1,76,000. Tax payable after TDS = ₹3,07,320 − ₹1,76,000 = ₹1,31,320.

Since this is far above ₹10,000, he must pay ₹1,31,320 as advance tax across the four dates:

If he pays these amounts on time, he owes no interest. You can run these numbers for your own situation against the slab rates.

Rental income alongside salary. A salaried employee earns ₹15L salary (fully covered by TDS) but also receives ₹3L annual rent from a property. After 30% standard deduction on rental income: ₹2,10,000 net rental income. Tax at the 30% old-regime rate = ₹63,000. That is ₹10,000 or more, so advance tax is required on the ₹63,000.

The easier alternative: increase your salary TDS. There is a way to skip the quarterly advance tax routine entirely. Under the income tax rules, you can declare your other income to your employer, and they will factor it into your salary TDS. Your monthly tax deduction goes up, the extra tax gets spread across your payslips, and you no longer need to make separate advance tax payments on the portal.

This works well for predictable income like rent or a fixed consulting retainer. You simply give your employer a written declaration of the expected other income, and the payroll team grosses up your TDS. The downside is lower monthly take-home pay, but the upside is zero advance tax admin and no risk of 234C interest.

It works less well for capital gains, which are lumpy and unpredictable; for those, direct advance tax payment is usually cleaner. Many salaried freelancers use a hybrid: declare steady side income to the employer, and pay advance tax directly only on capital gains as they arise.

Self-Employed Professionals and Freelancers

Presumptive income under 44ADA. If your professional receipts are within the limit, the presumptive taxation scheme under 44ADA deems your professional income to be 50% of gross receipts. This forms the basis for advance tax calculation, and you don't need to itemise expenses or keep detailed books.

A common mistake is misidentifying as 44ADA when not eligible. Section 44ADA applies to specified professions: doctors, lawyers, engineers, architects, accountants, technical consultants, management consultants, interior decorators, and a few others. Freelancers whose work doesn't fall under a specified profession (photographers, content creators, graphic designers, social media managers) typically use Section 44AD (business income), which has a different presumptive rate (6% of turnover for digital/bank receipts, 8% for cash). If neither applies, regular accounting and ITR-3 is required.

Two consultants on the same ₹36 lakh. A freelance management consultant in Bengaluru, FY 2026-27:

• Projected gross receipts: ₹36 lakh
• Opts for 44ADA (presumptive): taxable income = ₹18 lakh
• Has no other income except ₹80,000 in bank FD interest
• Total taxable income: ₹18,80,000
• Tax under new regime (FY 2026-27 slabs, which Budget 2026 left untouched): ₹1,76,000 plus 4% cess of ₹7,040 = ₹1,83,040
• TDS expected from clients (10% on ₹36L): ₹3,60,000, which exceeds total tax liability

In this case, total advance tax liability = ₹0 after netting the expected TDS. No advance tax payments are needed.

Now a second consultant on the same ₹36 lakh of receipts, paid entirely by individuals and small businesses that don't deduct TDS, and with no other income at all:

• Projected gross receipts: ₹36 lakh, no TDS deducted by any client
• Taxable income (44ADA): ₹18 lakh, and nothing else
• Tax under the new regime, slab by slab: nil on the first ₹4 lakh; 5% on the next ₹4 lakh = ₹20,000; 10% on the next ₹4 lakh = ₹40,000; 15% on the next ₹4 lakh = ₹60,000; 20% on the remaining ₹2 lakh = ₹40,000. Total ₹1,60,000, plus 4% cess of ₹6,400 = ₹1,66,400
• That is far past the ₹10,000 trigger, so advance tax is mandatory
• Under 44ADA: single instalment of ₹1,66,400 by 15 March

The gap between the two consultants (₹1,83,040 against ₹1,66,400) is exactly ₹16,640, which is the tax and cess on the first one's ₹80,000 of FD interest. That interest sits wholly inside the 20% band, because her professional income has already used up everything below it. Interest income is never too small to matter for advance tax: it stacks on top of the rest at your highest rate.

A consultant who is not on the presumptive scheme. Take a self-employed management consultant who is not on the presumptive scheme, estimating his tax for the year.

• Projected professional income: ₹18,00,000
• Business expenses (rent, software, travel, staff): ₹6,00,000
• Estimated net taxable income: ₹12,00,000

Suppose his computed income tax plus cess on ₹12,00,000 works out to roughly ₹1,20,000 for the year. That figure assumes the old regime (under the new regime, the Section 87A rebate makes tax nil up to ₹12 lakh of taxable income), and the exact figure depends on his deductions; he checks this on the portal's calculator.

His clients have deducted TDS of ₹40,000 on his fees through the year. So his advance tax liability is:

• Total tax: ₹1,20,000
• Less TDS already deducted: ₹40,000
• Advance tax payable: ₹80,000

Now apply the cumulative milestones to the ₹80,000:

If he pays on this schedule, he owes no interest. If, instead, he ignores the year and pays the whole ₹80,000 only at filing, he faces interest under Section 234C (for missing each instalment) and likely Section 234B (for paying under 90% of the tax during the year), at 1% per month on the shortfalls. On ₹80,000 that interest can run into several thousand rupees, entirely avoidable. There is a cash-flow dimension too: paying ₹12,000–24,000 each quarter is comfortable; discovering an ₹80,000 bill in one go at filing is a shock.

Set money aside as it arrives. Advance tax hurts because it lands as a lump sum on dates you forgot. Fix it the way salaried TDS works: the day each client payment arrives, move 25–30% into a separate tax account. By each deadline the money is already there: you're transferring from your own buffer, not scrambling. This one habit turns advance tax from a quarterly shock into a non-event.

Businesses

For a business, the estimate starts from the books. Two anchors make it manageable: keep a running profit estimate, and keep a tally of TDS already deducted. A simple profit margin calculator helps you sanity-check the profit you are projecting, and the TDS tally confirms how much credit you already have in hand.

A working capital view and a steady business cash flow plan keep advance tax instalments from biting. For businesses with seasonal patterns, mapping expected income across the year and overlaying the four due dates on it turns advance tax from a guessing game into a schedule. A cash flow view that already plots your seasonal inflows is the natural place to mark where each instalment falls and whether the cash will be there.

Advance tax also interlocks with your other filing duties through the year. The TDS your clients deduct, the GST you collect and remit and your eventual income tax return share a rhythm, and treating them as one calendar rather than separate surprises is what keeps a small business compliant without stress. Advance tax instalments in June, September, December and March slot between GST filing dates and TDS deposit dates; seeing them on a single view prevents any one of them from ambushing your cash. The same "money held in trust, set aside as you earn" discipline that works for GST works for advance tax: both are amounts you owe that should never feel like spending money.

Why I Treat Advance Tax as a Cash Problem First

Most advice on advance tax is about the calculation, and the calculation is the easy part. The hard part, in any business whose money moves with a season, is having the cash on the four dates.

Our business sees that timing from both sides. Paddy is bought and paid for in a compressed harvest window, before the rice is milled and sold. Fertiliser goes out to farmers on credit until their harvest. Much of the rice is sold on credit to wholesalers and distributors. In a business that keeps its books on the usual accrual basis, profit is counted when the sale is made, not when the money arrives, and advance tax is worked out on that profit. So an instalment can fall due on money that is still sitting in the godown or with a buyer.

The instalments make it sharper. They are shares of the whole year's estimated tax, so by 15 September you are expected to have paid 45% of the tax for a year whose busiest months may not have happened yet. The law cushions a little of this (no 234C interest for June if you have paid at least 12%, or for September if you have paid at least 36%), but December and March have no cushion at all.

That is why I would plan advance tax the way I think about the cash credit account our mill runs on: around what is actually available on the day, not the figure on paper. In practice:

1. Mark the four dates on the cash flow, not only on the tax calendar. Put each instalment against that month's expected collections and see which ones land in a thin month. The agribusiness cash flow template on this site lays out the year by crop season, which makes the thin months easy to spot.
2. Set tax aside from collections as they come in. A slice of every large receipt goes to a separate account the day it lands, so the instalment is paid from money already put away.
3. True up at each date with real books. Before each instalment, look at the profit to date and at what buyers still owe, and revise the year's estimate rather than repeating the June figure.

A small trader on the presumptive scheme escapes most of this, because the whole year's advance tax can go in one instalment by 15 March. For everyone else, none of this changes the tax. It changes whether paying it feels like a shock. Cash flow forecasting covers the wider habit.

Interest Under Sections 234B and 234C

There is no separate "penalty" as such, but you pay interest, which functions like one. Two sections create the cost of getting advance tax wrong. Both charge simple interest at 1% per month or part of a month, and both can apply together.

Section 234C: Missing or Short-Paying an Instalment

If by any due date your cumulative payment is below the required percentage, Section 234C charges interest on the shortfall: for three months at each of the first three dates, and for one month at the March date. This is the "you were late within the year" charge.

The tolerance most people never hear about. The first two instalments have a statutory cushion built into them. Under Section 425(2) of the Income-tax Act, 2025 (the same relief the 1961 Act carried in the first proviso to Section 234C), you owe no 234C interest for the June instalment if you have paid at least 12% of the year's tax by 15 June, and none for the September instalment if you have paid at least 36% by 15 September. The scheduled targets are still 15% and 45%; the tolerance simply means a small miss on those two dates costs nothing. There is no equivalent for December (75%) or March (100%): miss those by a rupee and interest runs on the whole shortfall for that quarter. So the practical rule is: if cash flow is tight early in the year, 12% by June and 36% by September keep you clean, but be exact in December and March.

Worked example. Total tax liability for FY 2026-27: ₹3,00,000. Say the payments by each date were:

• June: ₹0 (paid nothing)
• September: ₹1,20,000 (cumulative)
• December: ₹2,10,000 (cumulative)
• March: ₹3,00,000 (cumulative)

June deadline: Required 15% = ₹45,000. Paid ₹0, below the 12% (₹36,000) tolerance, so the tolerance does not help. Shortfall: ₹45,000. Interest: 1% × ₹45,000 × 3 months = ₹1,350

September deadline: Required 45% = ₹1,35,000. Paid ₹1,20,000, which is 40% of the year's tax, at or above the 36% (₹1,08,000) tolerance, so Section 425(2) applies and the ₹15,000 shortfall is ignored. Interest: nil

December deadline: Required 75% = ₹2,25,000. Paid ₹2,10,000. No tolerance applies here. Shortfall: ₹15,000. Interest: 1% × ₹15,000 × 3 months = ₹450

March deadline: Required 100% = ₹3,00,000. Paid ₹3,00,000. No shortfall.

Total Section 234C interest: ₹1,350 + ₹450 = ₹1,800

This is relatively small because the payments caught up quickly, and because the September tolerance absorbed a ₹15,000 miss entirely; the identical ₹15,000 miss in December cost ₹450. Had nothing been paid until 15 March, the interest would be substantially higher.

Section 234B: Paying Less Than 90% by 31 March

If total advance tax paid by 31 March is less than 90% of your assessed tax, interest at 1% per month runs from 1 April to the date of payment (self-assessment tax payment or actual filing, whichever is earlier). This is the "you underpaid overall" charge. Be clear about what the interest is charged on: not the 10% you were allowed to miss, but the whole amount by which your advance tax fell short of the assessed tax. The 90% is only the trigger that switches Section 234B on. Once it applies, the base is the full shortfall, and if you paid nothing at all it is the entire assessed tax.

Example: Your total tax liability for FY 2026-27 is ₹2,00,000. You paid ₹0 in advance tax (forgot entirely). Self-assessment tax was finally paid on 31 July 2027. You paid no advance tax, so the shortfall is the whole assessed tax of ₹2,00,000, not ₹1,80,000. Interest = 1% × ₹2,00,000 × 4 months (April, May, June, July) = ₹8,000. Section 234C for each missed quarterly deadline adds further interest based on the quarterly shortfalls.

A third section, 234A, applies if you file your ITR late and have an outstanding liability.

The interest rates are not crushing, but they add up, and more importantly they indicate systematic non-compliance that can attract scrutiny. The fix is simple: estimate early and pay something in June rather than nothing.

How to Pay Advance Tax and Check the Payment

Advance tax is paid online using Challan 280 (the same challan as self-assessment tax) through the income tax e-filing portal:

1. Go to incometax.gov.in and open e-Pay Tax under the Services menu.
2. Pick the Act first. e-Pay Tax now opens by asking which Act your payment falls under: Income Tax Act 1961 covers assessment year 2026-27 and earlier (income up to FY 2025-26), and Income Tax Act 2025 covers tax year 2026-27 onwards.
3. Select Income Tax (Challan 280) from the tiles that appear.
4. Set Type of Payment to "Advance Tax (100)" and select the period. There is no assessment year under the 2025 Act. The department's own challan guide says challans under the old Act were filed on the assessment year, while under the new one they must be filed on the tax year, which is simply the year you earned the money. So for FY 2026-27 income you select Tax Year 2026-27; AY 2027-28 is not on offer. Tax on FY 2025-26 income still goes against AY 2026-27 under the old Act; the department flags exactly this pair as the thing to get right during the changeover, so that credit lands in the correct year.
5. Enter the amount and pay via net banking, UPI, or debit card.
6. Save the challan receipt. It is your proof of payment, and it contains the BSR code and challan serial number that you'll need when filing your ITR.

Picking the wrong period credits the payment to the wrong year, which shows up as a mismatch when you file and takes effort to correct, because the money sits credited against the wrong period. Pause on this field before confirming the payment.

Advance tax payments appear in Form 26AS under Part C within a few days of payment. Always verify this before the next instalment. Keep digital copies of the Challan 280 PDFs, with their BSR codes and serial numbers, in your financial documents folder. You need them to reconcile and to claim credit at filing.

Fixing a Shortfall or an Overpayment

During the year. If your income turns out higher than you estimated, you top up in the next instalment; it is fine to revise your estimate each quarter as the year unfolds. A missed instalment still attracts 234C interest even if you catch up later, as the ₹1,350 for June in the worked example shows, but catching up quickly keeps the later shortfalls and their interest small.

After the year: self-assessment tax. If any tax remains due beyond advance tax paid and TDS credited, the balance is paid as Self-Assessment Tax (SAT), using the same Challan 280 and selecting "Self-Assessment Tax (300)" instead of "Advance Tax (100)". This must be paid before filing the ITR, as the ITR requires entering the challan details. If you've been regular with advance tax throughout the year, the SAT amount is typically small: just the true-up after actual figures are known versus estimates used for advance tax.

Know which filing date is yours. From AY 2026-27 the return deadline split in two: taxpayers with business or professional income who are not subject to audit now file by 31 August, while salaried and other non-business taxpayers stay on 31 July. That extra month is a filing extension, not an advance tax extension: 15 March and the 234B clock from 1 April are untouched by it.

If you overpaid. Overpaying advance tax is not a problem. The excess sits as a credit against your tax liability and becomes a refund when you file your ITR. Refunds are processed by the Income Tax department after ITR verification (e-verification within 30 days of filing). Most refunds for individuals are processed within 3–6 weeks of ITR processing, credited directly to the bank account linked to your PAN.

Overpaying is preferable to underpaying because:

• You earn a small government interest rate on refunds (currently 6% per annum under Section 244A) if the refund exceeds 10% of tax due
• There is no penalty for overpaying
• Underpaying triggers 234B/234C interest

Over-estimating wildly to be safe is not free either, though: tying up cash in excess advance tax has a cost, so aim for a reasonable estimate and true up by March.

Seven Common Advance Tax Mistakes

Assuming the ₹10,000 test is about side income alone. The threshold is about your total tax after all TDS, not just the tax on side income. You combine everything, subtract every rupee of TDS, and check whether the leftover reaches ₹10,000.

Forgetting the June instalment, or skipping June and September to catch up in March. The 15 June deadline is the most commonly missed because it falls right after the financial year starts, before most people are thinking about taxes. Missing it triggers 234C interest even if you catch up later, and the same goes for a skipped September instalment.

Counting fees net of TDS. Income includes all professional fees regardless of TDS deduction. If a client paid you ₹90,000 after deducting ₹10,000 TDS, your income is ₹1,00,000. Your tax is computed on ₹1,00,000, not ₹90,000.

Treating freelance gross receipts as taxable income. You pay tax on profit, not turnover. Deduct genuine business expenses (software subscriptions, internet, a portion of rent if you work from home, professional fees) before computing tax, unless you use the 44ADA presumptive route described above.

Ignoring TDS already deducted and overpaying. Some people panic and pay advance tax on their full income without subtracting the TDS the bank and clients already deducted. You only pay the gap.

Forgetting non-client income. Interest from savings accounts (above ₹10,000), FD interest, rental income and capital gains: all taxable income counts for advance tax. Bank FD interest is fully taxable (unlike savings bank interest, which has a partial exemption under 80TTA up to ₹10,000, but only if you are on the old regime; the new regime allows neither). Interest below the bank TDS threshold is still fully taxable; it just arrives with no TDS credit attached to soften your advance tax.

Paying advance tax under the wrong head or PAN. When you pay on the portal, select "Advance Tax" (minor head 100), not "Self-Assessment Tax", and double-check your PAN. A mismatch means the credit may not reflect against your return.

A Routine for the Year and for Each Instalment

Most advance tax errors happen because people don't know their income position until they try to file the return, so track your income quarterly, not annually.

At the start of the year. Make a rough annual projection in April or May using the calculation above, and compare the tax against the TDS that will be deducted. If the gap is ₹10,000 or more, you have advance tax to pay.

• List out every income source and the TDS each will attract, so you can see how much is already being covered at source.
• Confirm whether you are a regular taxpayer (four instalments) or presumptive (one instalment by 15 March).
• Mark the four due dates (15 June, 15 September, 15 December, 15 March) in your calendar now, with their cumulative targets of 15, 45, 75 and 100 percent.
• Keep a simple tax document checklist so your freelance invoices, rent receipts and interest certificates are organised when the time comes to file.

Before every instalment.

Doing this exercise takes 30–45 minutes each quarter. The alternative, a surprise tax demand at ITR filing, takes significantly longer and costs you interest under 234B and 234C. The tax planning guide fits these four dates into the rest of the tax year.

The tax is the same whether you pay it in instalments or at the end. What planning changes is whether the money is there on the day, and that part is entirely in your hands.

For personal tax or legal decisions, consult a qualified professional.