Advance Tax - Who Pays & When

If your only income is a salary and your employer deducts TDS correctly, you have nothing to do here.

If you have income beyond salary, freelancers, professionals, business owners, landlords, investors with capital gains, you need to actively track it.

Advance tax is one of the most common places we see interest charges that were entirely avoidable.

Here's who's on the hook, when, and how to stay ahead of it.

1. Who has to pay

Anyone whose advance-tax liability for the year, after accounting for expected TDS and TCS, is ₹10,000 or more, subject to the specific exemptions under the law. It applies to salaried individuals with side income, freelancers, consultants, traders, landlords, LLPs, companies, and NRIs with taxable income in India.

The one exemption: resident senior citizens aged 60 or above, with no income from business or profession. If a senior citizen runs a business or practice, the exemption does not apply.

Salaried employees are not automatically exempt. TDS on your salary covers your salary income. It says nothing about capital gains from selling stock or property, rental income, freelance or consulting income, interest on fixed deposits, or crypto gains. Add those up, and you can cross the ₹10,000 threshold without realising it.

2. A worked example we'll follow throughout

That ₹2,00,000 is the figure every percentage below applies to. We'll follow it through the schedule, and then through what happens if she gets it wrong.

3. When to pay, and how much

The percentages are cumulative. They show how much of the year's total tax should have been paid by each date, not how much you pay on that date. The table shows both the cumulative amount and the additional payment due.

Due date	Cumulative %	Total to be Paid	Payment Due
15 June	15%	₹30,000	₹30,000
15 September	45%	₹90,000	₹60,000
15 December	75%	₹1,50,000	₹60,000
15 March	100%	₹2,00,000	₹50,000

Note: The amounts shown above are based on Meera's estimated advance tax liability of ₹2,00,000 and are for illustration only. Your actual instalment amounts will depend on your estimated tax liability for the year.

If you're on the presumptive taxation scheme (available to eligible individuals, HUFs, and partnership firms, not LLPs or companies), you skip the schedule above entirely and pay the full 100% in a single instalment by 15 March.

4. What it costs to miss a date

Two separate interest charges can apply. Both run at 1% per month for the relevant period, using simple interest, but they measure different things, and they can both land on the same return.

Charge one: the instalment shortfall. Charged on whatever you were short at each due date, for a fixed period: three months for the June, September, and December instalments, and one month for the March instalment. Fixed means fixed: paying the balance a day later or three months later does not change this charge.

Charge two: the year-end shortfall. If your total advance tax paid by 31 March is less than 90% of the tax payable after taking the relevant tax credits into account, a separate charge starts on 1 April and runs at 1% per month until you actually pay. Unlike the first charge, this one keeps growing the longer you leave it.

Illustration assumes the full ₹50,000 is the amount on which the year-end interest is calculated. Actual interest should be determined based on the applicable tax computation.

5. Working out your own numbers

Step 1: Estimate your full-year income across every head: salary, business or professional income, capital gains, rent, interest, anything else.

Step 2: Work out the gross tax under the regime you plan to use, including any applicable surcharge and cess.

Step 3: Subtract expected TDS and TCS. Use the tax you expect to be deducted or collected and available as credit for the year.

Step 4: Apply the cumulative percentages to the resulting figure and pay on each due date.

You can revise the estimate as the year goes on. If a large capital gain or other significant income arises in October, factor the additional tax into your December and March instalments. Specific rules provide relief from instalment-shortfall interest for certain income that arises later in the year.

6. Mistakes we see most often

• Reading the percentages as incremental. Paying ₹90,000 on 15 September because "45% of ₹2,00,000 is ₹90,000" is correct only if nothing was paid in June. The 45% includes the June instalment.
• Assuming salary TDS covers everything. It only covers the salary. Capital gains, rent, freelance income, and interest can create an additional tax liability.
• Waiting to true-up everything in March. The June and September shortfall interest is locked in once those dates pass. Paying the full balance in March does not undo it.
• Forgetting a large one-off gain. A property sale, bonus, or large professional receipt can materially change your advance-tax position. Track it the quarter it lands, not at return-filing time.
• Underestimating deliberately to preserve cash flow. A missed instalment triggers a fixed charge. But if the shortfall is still open on 31 March, the second charge starts on 1 April and does not stop until you pay.

The numbers change with every source of income you add through the year. This is a framework, not a substitute for running your own estimate. Talk to us before your next instalment date.

This article reflects the advance-tax framework applicable for Tax Year 2026-27 under the Income-tax Act, 2025, and is for general guidance only.