Let me start with a situation many people face.
You earn a salary, maybe some freelance income, or small business income. At the end of the year, you suddenly realise—tax payable is quite high. Instead of paying everything at once, the government expects you to pay tax in parts during the year itself. This is called advance tax in India.
In this guide, I’ll explain everything in a simple way—who needs to pay, how it is calculated, when to pay, and what happens if you don’t.
Advance Tax
In very simple words, Advance tax means paying your income tax in advance during the year, instead of paying the full amount at the end. This is based on your expected income for the year, not just past income. So if you expect to earn during the year, you also start paying tax gradually.
Note:
- There are no policy changes in the provisions governing the payment of advance tax under the new Income Tax Act, 2025.
- The only modification is the introduction of the term “Tax Year,” replacing the concept of the Assessment Year for determining advance tax liability.
- Advance tax will continue to be paid during the same year in which the income is earned, consistent with the existing framework under the Income Tax Act, 1961.
- The due dates for quarterly installments remain unchanged.
- The prescribed percentage of advance tax payable at each installment also remains unchanged.
Current Income (Very Important Concept)
Before we go further, let’s understand one term that often confuses beginners.
“Current income” simply means:
The income you expect to earn in the ongoing financial year.
This includes:
- Salary
- Business income
- Freelancing income
- Interest income
- Any other taxable income
Example
Let’s say, you expect to earn ₹8,00,000 this year. This ₹8,00,000 becomes your current income, and advance tax will be calculated on this.
Who Needs to Pay Advance Tax
Now the practical question: Do you need to pay advance tax? You need to pay advance tax if: Your total tax payable during the year is ₹10,000 or more
Example
If after calculation:
- Your total tax = ₹12,000 → You must pay advance tax
- Your total tax = ₹8,000 → No need to pay advance tax
Who Does NOT Need to Pay Advance Tax
There is one important relief many people don’t know. If all the following are true:
- You are a resident individual in India
- Your age is 60 years or more (senior citizen)
- You do not have business or professional income
Then you do not need to pay advance tax. Many retired people living on Pension or Interest income do not need to worry about advance tax.
How Advance Tax is Calculated (Simple Explanation)
Now let’s simplify the formula.
The law says:
Advance Tax = Tax on your estimated income − Tax already deducted (TDS/TCS)
Let’s break this into normal language.
Step-by-Step Understanding
- Estimate your total income for the year
- Calculate tax on that income
- Reduce:
- TDS (tax deducted by employer, bank, etc.)
- TCS (tax collected at source, if any)
The remaining amount is your advance tax
Example
Suppose:
- Expected income = ₹10,00,000
- Total tax = ₹75,000
- TDS already deducted = ₹25,000
Advance tax = ₹75,000 − ₹25,000 = ₹50,000
This ₹50,000 must be paid in installments.
Special Point: Agricultural Income
In some cases, agricultural income is also considered while calculating tax. What this means in simple terms:
- Agricultural income itself is not taxed
- But it may be used to increase your tax rate
If you have: Farming income + other taxable income
Then agricultural income may be included in your estimate while calculating advance tax.
Paying Advance Tax Yourself (Self-Calculation)
In most cases, you don’t wait for any notice.
You calculate and pay advance tax on your own.
This is based on: Your own estimate of income
Important Flexibility
During the year, your income may change.
So you can:
- Increase your payment if income goes up
- Reduce your payment if income goes down
This is very practical and commonly happens.
When Assessing Officer Orders Advance Tax
Sometimes, the tax department may step in. If you have been assessed earlier, the Assessing Officer (AO) may:
- Estimate your income based on past returns
- Ask you to pay advance tax
This comes through a written order and demand notice
How They Decide Your Income
They will consider whichever is higher:
- Your last assessed income OR
- Income you declared in recent returns
Can This Order Change?
Yes.
If:
- You file a new return OR
- Your income is reassessed
Then the officer may revise the order.
What If You Disagree with Their Estimate
This is where many beginners get confused.
If you feel: “My actual income will be lower than what they assumed”
You can:
- Inform the officer (through a prescribed form)
- Pay tax based on your own estimate
What If Your Income is Higher
If your income turns out higher than expected: You must pay the extra advance tax before the last installment.
Advance Tax Installments and Due Dates
Now comes the most practical part—when to pay.
You don’t pay everything at once.
You pay in 4 parts during the year.
Standard Installment Schedule
| Installment | Due Date | Cumulative Minimum Advance Tax Payable |
|---|---|---|
| 1st Installment | On or before 15th June | Not less than 15% of advance tax |
| 2nd Installment | On or before 15th September | Not less than 45% of advance tax |
| 3rd Installment | On or before 15th December | Not less than 75% of advance tax |
| 4th Installment | On or before 15th March | 100% of advance tax |
Example
Total advance tax = ₹40,000
- June → ₹6,000
- September → ₹18,000 total
- December → ₹30,000 total
- March → ₹40,000 total
Special Case: Presumptive Income (Small Businesses)
Some small businesses follow a simplified taxation method. In such cases: Entire advance tax can be paid in one go by 15 March.
Payment Till 31st March
If you pay tax by 31st March:
It is still treated as advance tax for that financial year.
This gives a small practical window for correction.
When You Are Treated as “In Default”
Now an important compliance point. You are treated as a defaulter if:
- You don’t pay installments on time
- You don’t inform the officer when required
- You don’t pay based on your own updated estimate
Usually, this leads to:
- Interest charges
- Possible notices
This is where many beginners make mistakes.
Here’s the good part.
Whatever advance tax you pay, it is adjusted against your final tax when you file your return.
Example
- Total tax liability = ₹80,000
- Advance tax paid = ₹50,000
You only need to pay remaining ₹30,000
Or if excess paid, you get a refund.
Precautions taxpayers should take during the transition year (FY 2026–27) while making tax payments
During the transition to the new Act, taxpayers must carefully select the correct year while making tax payments to ensure proper credit.
- For income related to FY 2025–26, select Assessment Year (AY) 2026–27.
- For income related to FY 2026–27, select Tax Year 2026–27.
Example:
- Self-assessment tax for FY 2025–26 paid in June 2026 → choose AY 2026–27
- Advance tax for income earned from April 2026 to March 2027 → choose Tax Year 2026–27
The government will support both systems during the transition, but correct year selection is essential to avoid errors in tax credit.
Conclusion
Advance tax may sound complicated at first, but in practice, it is simply: Paying your tax gradually as you earn during the year. Key things to remember:
- It applies if tax is ₹10,000 or more
- Advance tax is calculated Based on your expected income
- Its paid in installments
- You can adjust advance tax during the year
- It gets credited in your final tax calculation
If you’re earning from multiple sources or doing freelance/business work, understanding advance tax early can save you from last-minute stress.
Advance Tax in India
| Topic | Explained |
|---|---|
| What is Advance Tax? | It simply means you don’t wait till the end of the year—you keep paying your tax bit by bit during the year. |
| Which Income is Considered? | It’s based on what you think you’ll earn in the current financial year. |
| Who needs to pay for it? | If your total tax comes to ₹10,000 or more, you’re expected to pay advance tax. |
| Who can skip it? | If you’re a senior citizen (60+) living in India and don’t have business income, you don’t need to worry about it. |
| How do you calculate it? | First find your total tax, then subtract the TDS already deducted—what’s left is what you pay as advance tax. |
| Example | Suppose your tax is ₹1,75,000 and ₹1,25,000 is already deducted (TDS), then you pay ₹50,000 as advance tax. |
| What about agricultural income? | It’s not taxed directly, but sometimes it can increase the tax rate you fall under. |
| Who actually pays it? | In most cases, you calculate and pay it yourself—no one reminds you. |
| Can you change the amount later? | Yes, if your income changes during the year, you can increase or reduce the next payments. |
| Can the tax officer interfere? | Yes, they might ask you to pay based on your past income records. |
| What if you disagree with them? | You can inform them and pay based on your own estimated income. |
| When do you pay it? | You pay it in 4 parts—June, September, December, and March. |
| By when must it be fully paid? | Ideally by 15th March, but you can still pay till 31st March. |
| Special case (small businesses) | If you’re under presumptive taxation, you can pay the full amount in one go by 15th March. |
| What if you don’t pay on time? | You may have to pay interest or penalties—so it’s better not to delay. |
| What happens at the end? | Whatever you’ve already paid as advance tax gets adjusted when you file your final tax return. |
Advance Tax Section Mapping: New Income-tax Act, 2025 vs Income-tax Act, 1961
| Topic | Sections of the New Income-tax Act, 2025 | Sections of Old Income-tax Act, 1961 |
|---|---|---|
| Liability for payment of advance tax | 403 | 207 |
| Conditions of liability to pay advance tax | 404 | 208 |
| Computation of advance tax | 405 | 209 |
| Payment of advance tax by assessee on his own accord | 406 | 210 |
| Payment of advance tax as per order of Assessing Officer | 407 | 209 / 210 / 211 |
| Instalments of advance tax and due dates | 408 | 211 |
| When assessee is deemed to be in default | 409 | 218 |
| Credit for advance tax | 410 | 219 |
| Interest for failure to pay advance tax or where advance tax paid is less than 90% of assessed tax | 424 | 234B |
| Interest for deferment of advance tax installments | 425 | 234C |
FAQs: Advance Tax in India for Beginners
If you are new to income tax, it’s normal to feel confused about advance tax. These FAQs will help clear both basic doubts and practical questions that usually come up in real life.
What is advance tax?
Advance tax means paying your income tax in small parts during the year instead of paying everything at once at the end. It is based on the income you expect to earn. This helps avoid a big tax burden later.
What is the threshold for payment of advance tax under the new Act?
Advance tax must be paid if your total tax liability for the year is ₹10,000 or more. As per Section 404 of the Income-tax Act, 2025, this limit remains unchanged from the previous Act.
What is the advance tax requirement for assessees under the presumptive taxation scheme?
Under the Income-tax Act, 2025, assessees opting for the presumptive taxation scheme (Section 58) are required to pay their entire advance tax in a single instalment on or before 15 March of the relevant financial year, as per Section 408(2). This requirement remains unchanged from the previous Act.
Is there any change in the interest rates for shortfall in payment of advance tax under the new Act?
No, there is no change in the interest rates. The rates remain the same as under the old Act.
Under the Income-tax Act, 2025:
- Section 424 (similar to Section 234B of the old Act): Interest is charged at 1% per month or part of a month for failure to pay advance tax or if the tax paid is less than 90% of the assessed tax.
- Section 425 (similar to Section 234C of the old Act): Interest is charged at 1% or 3% for the specified period due to deferment of advance tax installments.
Do salaried employees need to pay advance tax?
Usually, no, because companies already deduct TDS from their salary. But if you have extra income like rent, interest, or freelancing, you may still need to pay advance tax.
What are the due dates for advance tax payment?
You pay in four parts: by 15 June, 15 September, 15 December, and 15 March. Each time, you gradually pay more of your total tax.
How is advance tax calculated?
First, estimate your total income for the year. Then calculate tax on it. After that, subtract any TDS already deducted. The remaining amount is your advance tax.
What happens if I don’t pay advance tax?
If you miss payments, you may have to pay extra interest. In some cases, you may also receive notices from the tax department.
Can I change my advance tax amount during the year?
Yes, you can. If your income increases or decreases, you can adjust the remaining installments. This is very common in freelance or business income.
What is meant by current income?
Current income is simply the income you expect to earn in the ongoing financial year. It is not your past income.
Do senior citizens have to pay advance tax?
If a senior citizen (60 years or above) does not have business income, then they do not need to pay advance tax. This is a special relief.
What if the tax officer asks me to pay advance tax?
Sometimes the tax officer may send an order based on your past income. If you think your income will be lower, you can inform them and pay based on your own estimate.
What is presumptive taxation in advance tax?
This is a simple tax system for small businesses. In this case, you can pay the full advance tax in one go by 15 March instead of multiple installments.
Is advance tax different from TDS?
Yes. TDS is tax deducted by someone else (like your employer). Advance tax is what you pay yourself based on your income estimate.
Can I pay advance tax after 15 March?
Yes, you can still pay until 31st March, and it will be treated as advance tax. But it’s better to pay on time to avoid interest.
What happens to advance tax after I file my return?
It is adjusted against your total tax. If you paid more, you get a refund. If you paid less, you pay the balance.
Why do many beginners get confused about advance tax?
Because it is based on estimated income, not fixed numbers. Many people are unsure how much they will earn, so they delay or ignore it.
