Advance Tax Computation & Payment

What is advance tax?

Advance tax is income tax paid during the year, in instalments, rather than in one go after the year ends. If your tax for the year, after TDS, is ₹10,000 or more, you're expected to estimate it and pay it in four instalments by fixed dates.

It applies to companies, firms, LLPs, and individuals with income that isn't fully covered by TDS — business profits, professional fees, capital gains, rent, or interest. Paying too little, or too late, attracts interest.

The key terms

A few rules decide what and when to pay:

The ₹10,000 threshold

Advance tax is due if your estimated tax for the year, after TDS and TCS, is ₹10,000 or more.

Instalment dates

At least 15% of the year's tax by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March.

Presumptive taxpayers

Businesses and professionals under presumptive schemes can pay the whole amount in one instalment by 15 March.

Senior citizens

Resident senior citizens without business or professional income don't need to pay advance tax.

Interest for deferment

Paying less than the required percentage by an instalment date attracts interest of 1% per month on the shortfall, for that period.

Interest for default

If advance tax paid is less than 90% of the final tax, interest of 1% per month applies on the shortfall until it's paid.

Capital gains and windfalls

Tax on capital gains or other income that couldn't be foreseen can be paid in the instalments remaining after it arises, without deferment interest.

Why it matters

Advance tax is easy to get wrong without planning:

Interest adds up

Deferment and shortfall interest together can add a noticeable amount to the final bill.

Cash planning

Knowing instalments in advance avoids a large lump sum at year end.

TDS isn't always enough

Businesses and professionals often find TDS by customers doesn't cover their full tax.

Capital gains catch people out

A large gain from a sale of property or shares needs advance tax in the quarter it arises.

Businesses need estimates

Companies and firms must estimate profit during the year, which needs reasonably current books.

Less self-assessment tax

Paying through the year means less to pay, and less interest, when the return is filed.

Scrutiny signals

Large differences between advance tax and final tax can draw questions.

Who is this for?

Salaried people whose only income is salary usually don't need to pay advance tax, since their employer deducts TDS.

The instalment schedule

The cumulative percentages due by each date:

What we'll need from you

Year-to-date results

Current books, or at least income and expense figures, for the year so far.

Expected income

Your estimate of income for the rest of the year.

TDS and TCS

Tax deducted or collected so far, from Form 26AS and AIS.

One-off income

Any capital gains, large receipts, or other unusual income.

Previous year's return

As a starting point for the estimate.

Payment access

Net banking or a way to pay challans online.

We can compute advance tax once a year, or before every instalment date.

How we compute your advance tax

Before each instalment date:

1. 1

   Update the estimate

   We update the estimate of income for the year using actual results to date.

2. 2

   Compute tax

   Tax is computed under the applicable regime, including surcharge and cess.

3. 3

   Deduct credits

   TDS, TCS, and advance tax already paid are deducted.

4. 4

   Work out the instalment

   The amount needed to reach the cumulative percentage is calculated.

5. 5

   Pay

   You pay the challan online before the due date.

6. 6

   Track

   Payments are reconciled with Form 26AS, and the estimate carried forward.

At year end

Advance tax feeds into the return:

Self-assessment tax

Any remaining tax is paid before filing the return, with interest if applicable.

Refund

If advance tax exceeds the final tax, the excess is refunded after the return is processed.

Interest computation

Interest for deferment and shortfall is computed in the return.

Keep challans

Keep challan details to reconcile with Form 26AS.

Start next year

Use this year's final tax as the base for next year's June instalment.

New Act

From tax year 2026-27, advance tax continues under the Income-tax Act, 2025 on the same broad pattern.

Benefits and responsibilities