Understanding Advance Tax

When it comes to taxes, most people think of that one-time scramble in March. But for many taxpayers, the process starts much earlier in the year. If your tax liability exceeds a certain threshold, the Income Tax Department expects you to pay in advance — not just at year-end.

This concept is called Advance Tax. Think of it as paying your dues in parts, instead of waiting till the last minute. It helps reduce the burden on the government to collect large amounts at once and allows you, the taxpayer, to avoid interest penalties.

Let’s break it down in simple terms — who pays advance tax, when to pay it, and how to stay ahead of the deadlines.

💡 What Is Advance Tax?

Advance tax is the income tax paid in instalments throughout the financial year, rather than as a lump sum at the end. It’s often referred to as the “pay-as-you-earn” system.

If your estimated annual tax liability is ₹10,000 or more, you're required to pay advance tax as per the prescribed schedule.

👨‍💼 Who Needs to Pay Advance Tax?

You need to pay advance tax if your total tax liability (after TDS, if any) exceeds ₹10,000 in a financial year. This applies to:

• Salaried individuals with additional income (rental, interest, capital gains, etc.)
• Self-employed professionals and freelancers
• Business owners
• Investors earning profits from stocks, crypto, mutual funds, or property
• Senior citizens (above 60) who do not run a business are exempt from advance tax

✅ Example:

Let’s say your salary is ₹12 lakh annually and your employer deducts TDS. But you also earn ₹3 lakh per year from freelance projects. That freelance income isn't covered under TDS, so you're responsible for paying advance tax on it.

📆 Advance Tax Due Dates for FY 2025–26

The financial year runs from April 1, 2025 to March 31, 2026. Here’s the advance tax payment schedule:

Due Date	Advance Tax Payable
15th June 2025	15% of total estimated tax
15th September 2025	45% (cumulative)
15th December 2025	75% (cumulative)
15th March 2026	100% (full payment)

You can also make a last-minute adjustment by 31st March 2026, if needed.

🧮 How to Calculate Advance Tax?

Here's how to estimate your advance tax liability:

1. Estimate your total income for the year, including all sources (salary, rent, interest, capital gains, business income, etc.).
2. Deduct eligible deductions under sections like 80C, 80D, 24(b), etc.
3. Apply the correct tax slab rates based on your income level and regime (old or new).
4. Subtract TDS already deducted by employers or banks.
5. If your final payable amount is ₹10,000 or more, you must pay advance tax.

There are free government calculators and financial tools that can help, or you can consult a tax advisor for a precise estimate.

What Happens If You Don’t Pay Advance Tax?

Failure to pay advance tax — or paying less than what’s due — attracts interest penalties under Sections 234B and 234C of the Income Tax Act.

You could be liable to pay:

• 1% interest per month for shortfall or delay
• Additional penalties if under-reporting or wrong calculation is found during scrutiny

It may seem like a minor amount at first, but over time, these charges can pile up and dent your returns.

🔎 Common Scenarios Where Advance Tax Applies

• Sold shares or real estate for capital gains
• Have rental income from property
• Work as a freelancer or gig worker
• Earn interest from FDs, NCDs, or bonds
• High dividend or crypto income

In all these cases, you’re likely not covered fully by TDS. That’s why advance tax becomes necessary.

 Tips for Managing Advance Tax Smoothly

1. Track income quarterly: Keep an eye on variable income like freelance gigs or market gains.
2. Maintain updated records of all earnings and deductions.
3. Use Form 26AS or AIS (Annual Information Statement) to check how much TDS is already paid.
4. Pay online via the TIN-NSDL portal or the new e-pay tax facility on the income tax website.
5. Avoid last-minute payments — spread out the payments and plan for them financially.

💼 When in Doubt, Get Expert Help

If you’re dealing with multiple income streams or complex tax structures, it’s wise to get a professional opinion.

👉 JM Financial Services, a leading name in wealth and tax advisory, offers customised tax planning services. Their experts can help you:

• Accurately compute your advance tax liability
• Optimise your deductions and exemptions
• Avoid overpayment or penalties
• Align your tax strategy with your investment goals

A little help from professionals like JM Financial Services goes a long way in keeping your finances clean and your tax burden light.

📝 Final Thoughts

Advance tax may sound complicated, but it’s really just about being proactive with your finances. If you fall into the category of individuals with untaxed income, paying in quarterly instalments can save you a lot of stress and penalties down the line.

With rising incomes, digital payments, and evolving tax norms, staying informed is half the battle. The other half? Planning your taxes smartly — preferably with expert support.

FAQs

1. What is the minimum amount that triggers advance tax payment?

You must pay advance tax if your estimated tax liability (after TDS) exceeds ₹10,000 in a financial year.

2. Are senior citizens exempt from advance tax?

Yes, senior citizens (60+) who don’t run a business are exempt.

3. How can I pay advance tax online?

Visit the Income Tax Department’s e-pay portal or the TIN NSDL site, and pay via Challan 280.

4. What happens if I skip an advance tax deadline?

Interest under Sections 234B and 234C is charged for shortfalls or delays. It’s best to pay on time.

5. Can JM Financial Services help me calculate my advance tax?

Yes. JM Financial Services offers expert tax planning and advisory services to ensure accurate tax estimation, deductions, and timely payments.