Advance tax is one of those obligations that catches many taxpayers off guard. This guide explains the rules plainly — so you know whether you owe it, when to pay it, and what the consequences are if you miss.

What Is Advance Tax?

Advance tax — sometimes called "pay as you earn" tax — is the mechanism by which the Indian Income Tax Department collects tax on income before the financial year ends. Instead of paying everything in one shot when you file your ITR, you spread the payment across four installments throughout the year.

The logic is straightforward: if your total tax liability for the year is likely to exceed Rs. 10,000 after accounting for TDS already deducted, you are required to estimate that liability and pay it in advance on scheduled due dates.

Advance Tax Due Dates for FY 2026-27

Advance tax for FY 2026-27 must be paid in four installments. The cumulative percentages are minimums — you can always pay more than required in any installment.

Installment	Due Date	Min. Cumulative % Due	If Missed — Interest
1st	15th June	At least 15%	Section 234C applies
2nd	15th September	At least 45%	Section 234C applies
3rd	15th December	At least 75%	Section 234C applies
4th (Final)	15th March	100%	Section 234C applies

Note that these due dates are fixed by the Income Tax Act. If a due date falls on a bank holiday or Sunday, the payment made on the immediately following working day is treated as on time.

Taxpayers who opt for the Presumptive Taxation Scheme under Section 44AD, 44ADA, or 44AE are an exception: they need to pay the entire 100% advance tax in a single installment by 15th March only.

Who Must Pay Advance Tax — and Who Is Exempt?

The rule applies broadly, but the exemptions are significant. Here is a clear comparison:

Must Pay Advance Tax	Exempt from Advance Tax
Salaried individuals with other income > Rs. 10,000	Salaried employees (TDS fully covers tax liability)
Self-employed professionals (doctors, lawyers, CAs, etc.)	Senior citizens (60+) with no business/profession income
Freelancers and consultants	Taxpayers under Presumptive Scheme (Sec 44AD/44ADA/44AE) — pay by 15th March
Business owners not under presumptive scheme	Individuals with tax liability < Rs. 10,000 after TDS credit
Investors with capital gains, rental income, or dividend income	NRIs with only passive income subject to TDS
Partners in partnership firms

• Salaried professionals with side income: Freelance consulting fees, rental income, or capital gains from shares/mutual funds that push tax liability above Rs. 10,000 after TDS credit.
• Stock and F&O traders: Profits from intraday trading, futures and options, or equity delivery where TDS is not deducted at source.
• Business owners: Those not covered by the presumptive scheme must estimate income and pay all four installments.
• Rental income earners: Where tenant does not deduct TDS (common in residential lettings below Rs. 50,000/month), the landlord must self-assess and pay advance tax.
• Dividend income: Post Budget 2020, dividends are taxable in the hands of investors at slab rates. If total dividend income is large enough to push liability above Rs. 10,000, advance tax applies.

How to Calculate Your Advance Tax

The calculation is an estimation exercise done at the start of each installment period. You do not need to get it exactly right — but the cumulative payment must meet the minimum percentage thresholds on each due date.

1. Estimate your total gross income from all sources for the full financial year.
2. Deduct eligible deductions: Section 80C (up to Rs. 1.5L), 80D, HRA, home loan interest, etc.
3. Compute tax on net taxable income as per applicable slab rates (or 30% flat for VDA income).
4. Subtract TDS already deducted or expected to be deducted during the year.
5. If the net tax liability exceeds Rs. 10,000 — you owe advance tax.
6. Pay the applicable cumulative percentage by each installment deadline.

Interest Penalties for Non-Payment or Under-Payment

The Income Tax Act imposes simple interest for failing to pay advance tax on time or paying less than the prescribed threshold. These charges accrue automatically — they are not waived unless specific exceptions apply.

These interest charges can accumulate significantly over a year. On a Rs. 2,00,000 tax liability missed entirely, the Section 234B interest alone (from April to the date of assessment, say 12 months) amounts to Rs. 24,000 — a 12% effective cost on money you could have managed with quarterly payments.

Special Section: What Senior Citizens Must Check

Senior citizens — defined as individuals who are 60 years or older at any time during the financial year — enjoy a specific exemption from advance tax under Section 207 of the Income Tax Act. However, this exemption comes with an important condition that is widely misunderstood.

The Section 207 rule: Senior citizens (age 60+) who do NOT have income from business or profession are fully exempt from paying advance tax. They pay whatever tax is due at the time of filing their ITR by the due date.

However: A senior citizen who earns income from any business or profession — even a small consultancy, trading activity, or a proprietorship — does NOT qualify for this exemption and must pay all four installments of advance tax like any other taxpayer

Given the variety of income sources common among retirees, here is a scenario-by-scenario guide:

PRACTICAL CHECKLIST FOR SENIOR CITIZENS

• Check your income mix carefully: Pension, FD interest, dividend, and rental income are common — each has different TDS treatment.
• Verify TDS on FD interest: Banks deduct 10% TDS on FD interest if your PAN is registered. Submit Form 15H (senior citizens) to avoid TDS if total income is below the taxable threshold.
• Capital gains from mutual fund STP/SWP or share sales: These are taxable events. If gains are significant, estimate the tax and pay by 15th March even if no business income exists.
• Do not confuse bank holiday exemption with advance tax exemption: The Section 207 exemption is about the advance installment schedule — not about the final tax payable. All taxes still must be paid, just at ITR filing time.
• File Form 15H early in April: Submit at the start of FY 2025-26 to each bank or institution paying you interest, so TDS is not deducted unnecessarily.

How to Pay Advance Tax Online

Advance tax is paid through Challan 280 on the Income Tax Department portal or through authorised bank portals. The process takes under five minutes:

7. Visit incometax.gov.in and log in (or use e-Pay Tax without login).
8. Select "Income Tax" and then "Advance Tax (100)".
9. Enter the assessment year as 2026-27 (for FY 2025-26 advance tax).
10. Fill in the tax amount, surcharge, cess as applicable.
11. Pay via net banking, debit card, or NEFT/RTGS.
12. Download and save the Challan 280 receipt with BSR code and challan serial number.

The Bottom Line

Advance tax is not a complex obligation, but missing it is expensive. If your estimated tax liability for FY 2025-26 exceeds Rs. 10,000 after TDS credit, mark the four installment dates in your calendar and pay on time. The interest under Sections 234B and 234C is entirely avoidable.

Senior citizens with only pension, interest, or rental income benefit from the Section 207 exemption and can pay their dues at ITR time — but those with any business or professional income lose this benefit entirely. Knowing which category you fall into before the June 15 deadline is the most important step.

When in doubt, estimate conservatively and pay a little more than required. Any excess is fully refundable with interest when you file your ITR.

FAQ’s

Q1.  What is advance tax and who needs to pay it?

A.  Advance tax is income tax paid in installments during the financial year rather than as a lump sum at the time of filing your ITR. Any individual, HUF, firm, or company whose estimated tax liability for the year exceeds Rs. 10,000 — after deducting TDS already credited — is required to pay advance tax.

Q2.  What is the minimum tax liability threshold for advance tax?

A.  If your total tax payable after TDS credit is Rs. 10,000 or more in a financial year, you must pay advance tax. If it is below Rs. 10,000, you are not required to make any advance tax payment — you can pay the full amount at the time of filing your ITR.

Q3.  What are the advance tax due dates for FY 2025-26?

A.  There are four installments: 15% of estimated tax by 15th June, 45% cumulative by 15th September, 75% cumulative by 15th December, and 100% by 15th March 2026.

Q4.  Can a salaried employee be liable for advance tax?

A.  Yes. A salaried employee is generally exempt from advance tax because their employer deducts TDS from salary. However, if they earn additional income — such as rental income, freelance fees, capital gains, or dividends — that pushes their net tax liability above Rs. 10,000 after TDS credit, they must pay advance tax on that additional income.

Q5.  Are senior citizens exempt from advance tax?

A.  Senior citizens aged 60 years or above who do not have any income from business or profession are fully exempt from paying advance tax under Section 207 of the Income Tax Act. They can pay their entire tax liability at the time of filing their ITR. However, a senior citizen who has business or professional income does not qualify for this exemption and must follow the same four-installment schedule as other taxpayers.