Advance tax

Part of Income tax. 6 min read. Free lesson with a short video, quiz and practice.

Advance tax means paying your income tax in instalments during the year, instead of all at once when you file. The idea is "pay as you earn". Salaried people rarely need to think about it, because TDS on salary does the job. Freelancers, traders and people with large interest or capital gains often do.

Who must pay advance tax

You must pay advance tax if your expected tax for the year, after subtracting TDS and TCS, is ₹10,000 or more.

• Resident senior citizens (60 and above) with no business or professional income do not have to pay advance tax.
• Small businesses and professionals using the simple presumptive scheme can pay the whole amount in one go by 15 March.

The four due dates

A worked example

Rohit is a freelance designer. He expects tax of ₹1,20,000 for tax year 2026-27, and no TDS is deducted on his income. His instalments:

• By 15 June 2026: ₹18,000 (15%)
• By 15 September 2026: another ₹36,000 (total ₹54,000, 45%)
• By 15 December 2026: another ₹36,000 (total ₹90,000, 75%)
• By 15 March 2027: the last ₹30,000 (total ₹1,20,000)

If you pay late or too little

You pay simple interest of 1% a month on the shortfall: one charge for missing the instalments during the year, and another if less than 90% of your tax was paid by 31 March. The cost is not huge, but it adds up and is easy to avoid.

Gains you can't predict

If you make a capital gain or receive a dividend in the middle of the year, you could not have included it in earlier instalments. That's fine: pay the tax on it in the remaining instalments, and there is no interest for the earlier ones.

How to pay

Pay online on the income-tax portal (incometax.gov.in) using e-Pay Tax, choosing "advance tax" and the right tax year. Save the challan receipt; the payment also shows in your tax statement.