Did you know that missing your advance tax payments could cost you interest and penalties, even if you're salaried? If you’ve ever wondered what is advance tax, how to calculate advance tax, or when to pay advance tax, you’re not alone. This guide breaks it all down in a clear, actionable format, so you never miss a deadline again.
What is Advance Tax?
Most people associate taxes with the end of the financial year. But what if the Income Tax Department wants its dues before the year ends? That’s advance tax, the tax you pay as you earn.
If your total tax liability for the year exceeds ₹10,000 (after TDS), you are legally required to pay advance tax in instalments throughout the year. This applies not just to business owners and freelancers, but also to salaried individuals earning extra from rent, interest, or capital gains.
Who Should Worry About Advance Tax
Not everyone is required to pay advance tax, but if you fall into one of the following categories, you probably are:
Salaried individuals: Required only if they earn income beyond salary (e.g., rent, interest).
Freelancers and professionals: Since TDS may not be deducted on such income, advance tax becomes a must.
Businesses (Companies and Firms): Advance tax applies to their profits.
Senior citizens (above 60 years): Exempt from paying advance tax if they don’t earn income from business or profession.
When is Payable?
The Income Tax Department has set a schedule for when to pay advance tax across four instalments. Missing deadlines means interest under Section 234B and 234C. Stay ahead by remembering this schedule:
Due Date | % of Total Advance Tax Payable |
15th June | 15% |
15th September | 45% (Cumulative) |
15th December | 75% (Cumulative) |
15th March | 100% |
Note:
If you are under the Presumptive Taxation Scheme (Section 44AD or 44ADA), you can pay the entire advance tax in one instalment by March 15.
How to Calculate Advance Tax?
Here’s a simple 5-step process for how to calculate advance tax:
Estimate your total income from all sources – salary, business, capital gains, rental, etc.
Apply deductions under Sections 80C, 80D, etc., to get your net taxable income.
Calculate tax based on your applicable income tax slab.
Subtract TDS already deducted (if any).
If the remaining tax liability is more than ₹10,000, you need to pay advance tax.
Example:
Total Income: ₹12,00,000
Tax Liability (post-deductions): ₹1,20,000
TDS already paid: ₹60,000
Balance Tax Payable = ₹1,20,000 - ₹60,000 = ₹60,000
Since this exceeds ₹10,000, advance tax payment in instalments is mandatory.
Example: How Ritu, a Freelance Designer, Handles Advance Tax
Ritu is a freelance graphic designer earning ₹15 lakh a year, with no tax deducted at source. Instead of leaving things to the last minute, she calculates her tax liability, ₹1.5 lakh after deductions, and pays it in four timely instalments.
But managing taxes on top of client deadlines isn’t easy. That’s why Ritu works with a professional tax planner who helps her estimate income, track deductions, and stay on schedule. Each quarter, she simply reviews the plan, logs in to the Income Tax portal, and makes the payment.
Ritu’s smart move to get expert help keeps her compliant, stress-free, and focused on growing her business, without surprise penalties.
How to Pay Advance Tax Online?
You can easily pay advance tax through the Income Tax Department’s e-Filing Portal. Follow these steps:
Visit: https://www.incometax.gov.in
Log in using your PAN and password.
Go to the ‘e-Pay Tax’ section under the Payments tab.
Select Challan No./ITNS 280 for Advance Tax.
Enter relevant details and calculate the tax amount.
Make the payment and save the receipt for your records.
What Happens If You Don’t Pay On Time
Failing to pay advance tax or paying it late can lead to penalties under Section 234B and Section 234C of the Income Tax Act:
Section 234B: If you fail to pay at least 90% of your total tax liability by March 15, you’ll be charged 1% interest per month on the unpaid amount.
Section 234C: If you miss any quarterly instalment or pay less than the required amount, interest is charged for the delay.
Example:
If your advance tax liability is ₹40,000 and you only pay ₹30,000 by March 15, interest is calculated on the shortfall of ₹10,000.
Common Mistakes in Paying Advance Tax (And How to Avoid Them)
Here are some frequent errors taxpayers make when dealing with advance tax, along with how to fix them:
Underestimating income → Regularly review and update your income estimates.
Ignoring additional income → Don’t forget to include interest, rent, capital gains, and freelance income.
Delaying payment → Set reminders for each instalment date.
Paying less than required → Ensure that your advance tax matches 100% of your projected liability.
Before You Go: Advance Tax Checklist
To wrap up, here’s a quick checklist to help you stay on top of your advance tax payments:
✅ Estimate your total income from all sources accurately.
✅ Deduct eligible expenses and exemptions under relevant sections.
✅ Check if Tax Deducted at Source (TDS) has already been applied.
✅ If your remaining tax liability is more than ₹10,000, plan your advance tax payments accordingly.
✅ Mark all payment due dates in your calendar or set reminders.
Disclaimer: This blog is intended for informational purposes only and should not be construed as professional tax advice. Tax laws are subject to change. Please consult a certified tax consultant or chartered accountant for personalised guidance based on your financial situation.
