Advance Tax: Who Must Pay, When, and How to Calculate Instalment
Understand the four advance tax instalments (15/45/75/100%), who is exempt, how to compute each instalment, and what interest applies if you miss a deadline — Section 234B and 234C explained.
What Is Advance Tax?
Advance Tax is a pay-as-you-earn mechanism under Section 208 of the Income Tax Act 1961. If your estimated tax liability for the financial year is ₹10,000 or more (after TDS), you must pay it in instalments during the year itself — not as a lump sum at the time of filing.
Who Must Pay Advance Tax?
- All taxpayers (individuals, firms, companies) whose estimated tax liability ≥ ₹10,000 after TDS credit
- Exempt: Senior citizens (age ≥ 60 years) with NO income from business or profession
- Taxpayers under presumptive taxation (§44AD/§44ADA) — pay 100% of advance tax by 15 March
Instalment Schedule for FY 2026-27
| Instalment | Due Date | Cumulative % of Tax Liability |
|---|---|---|
| 1st | 15 June 2026 | 15% |
| 2nd | 15 September 2026 | 45% |
| 3rd | 15 December 2026 | 75% |
| 4th | 15 March 2027 | 100% |
How to Calculate Each Instalment
- Estimate your total income for the FY (salary, business profit, capital gains, other income)
- Apply applicable slab rates (old or new regime) to arrive at gross tax
- Subtract TDS already deducted / likely to be deducted
- The balance is your advance tax liability
- Pay the cumulative % due by each instalment date
Example: If estimated tax (after TDS) = ₹60,000:
- By 15 June: 15% = ₹9,000
- By 15 Sep: 45% = ₹27,000 (additional ₹18,000)
- By 15 Dec: 75% = ₹45,000 (additional ₹18,000)
- By 15 Mar: 100% = ₹60,000 (additional ₹15,000)
Interest Consequences of Missing Instalments
Section 234C — Short Payment of Instalment
Interest @ 1% per month on the shortfall from each due date:
- Short-paid 1st instalment → 3 months interest
- Short-paid 2nd instalment → 3 months interest
- Short-paid 3rd instalment → 3 months interest
- Short-paid 4th instalment → 1 month interest
Section 234B — Default in Advance Tax
If advance tax paid < 90% of assessed tax, interest @ 1% per month from April 1 after the FY until date of actual tax payment/assessment.
How to Pay
Advance tax is paid via Challan 280 (online through the Income Tax portal at incometax.gov.in) or at authorized bank branches. Select the correct assessment year: for FY 2026-27, the AY is 2027-28.
Tip: Use the Income Tax portal's pre-filled challan to avoid entering wrong PAN or assessment year. Always keep payment receipts for ITR verification.
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