Advance Tax — Due Dates, Calculation and Penalty for Non-Payment in India

Advance tax is the mechanism by which taxpayers pay income tax on their income as it is earned during the year — rather than paying the entire tax at the time of filing the return. If your total tax liability for the year exceeds ₹10,000, you must pay advance tax in four instalments. Missing or underpaying advance tax attracts interest under Sections 234B and 234C. Here is the complete guide.

Who Must Pay Advance Tax?

• All taxpayers (individuals, HUFs, firms, companies) whose estimated tax liability for the year exceeds ₹10,000 after TDS credit
• Business persons, professionals, investors with capital gains, rental income, business income — all must pay advance tax
• Senior citizens (60+ years) who do NOT have income from business/profession are exempt from advance tax
• Taxpayers under the presumptive taxation scheme (Section 44AD/44ADA) may pay entire advance tax in one instalment by March 15

Advance Tax Due Dates and Instalment Percentages

• 15 June: At least 15% of estimated annual tax liability
• 15 September: At least 45% of estimated annual tax (cumulative)
• 15 December: At least 75% of estimated annual tax (cumulative)
• 15 March: 100% of estimated annual tax (cumulative)

How to Calculate Advance Tax

Estimate your total income for the year from all sources: salary (net of standard deduction), business income, capital gains, house property income, other sources. Calculate tax on this estimated income. Deduct TDS expected to be deducted. If remaining tax exceeds ₹10,000, pay advance tax in installments as above.

Advance tax is paid using Challan 280 on the IT portal — selecting "Advance Tax" as the payment type. The tax is credited to your PAN and is reflected in Form 26AS.

Interest Penalty for Non-Payment

• Section 234B: If you fail to pay advance tax (or pay less than 90% of assessed tax) — interest at 1% per month on the shortfall, from April 1 of the assessment year to the date of actual payment
• Section 234C: If you pay less than the required percentage in each instalment — interest at 1% per month for 3 months on the shortfall in each instalment (1 month for the March instalment)

Special Rule for Capital Gains

If capital gains arise after 15 March (e.g., a property sale on March 25), the entire capital gains tax can be paid as a lump sum in the March 15 instalment — or even as self-assessment tax by July 31. No Section 234C interest for deferring capital gains tax from earlier instalments if the gains arose late in the year.

Conclusion

Advance tax compliance is a year-round obligation — not just a March payment. Missing instalments attracts recurring interest that compounds. SPOTON provides complete tax planning including advance tax computation and payment management for all categories of taxpayers. Contact us for expert income tax compliance services.