Income tax in India is meant to be paid as you earn, not in one lump sum when you file your return. For salaried employees, the employer’s TDS usually takes care of this. But if you earn interest, rent, capital gains, freelance fees or business income, part of your tax may not be covered by TDS, and the law expects you to pay it in instalments during the year. This is advance tax. With the third instalment for FY 2026-27 due on 15 December 2026, this article explains who must pay, how much is due by each date, how to pay, and what happens if you pay late, using the section numbers of the Income-tax Act 2025.
Key takeaways
- You must pay advance tax if your estimated tax for the year, after TDS and TCS, is ₹10,000 or more (Section 404, formerly Section 208).
- Cumulative instalments are due by 15 June (15%), 15 September (45%), 15 December (75%) and 15 March (100%) under Section 408 (formerly Section 211).
- Resident senior citizens aged 60 or more with no business or professional income are exempt.
- Late or short payment attracts simple interest of 1% per month under Section 424 (formerly 234B) and Section 425 (formerly 234C).
What is advance tax?
Advance tax is income tax paid during the year in which the income is earned, based on your own estimate of that year’s income. The Income-tax Act 2025 came into force on 1 April 2026, and the year from 1 April 2026 to 31 March 2027 is now called tax year 2026-27 (what was earlier described as FY 2026-27, AY 2027-28). The charge to pay advance tax is in Section 403 (formerly Section 207), and the method of computing it is in Section 405 (formerly Section 209). The rules themselves are substantially the same as under the 1961 Act; mainly the section numbers have changed.
Who must pay advance tax?
The test is simple: estimate your total tax for the year, subtract the TDS and TCS you expect to be deducted or collected, and if the balance is ₹10,000 or more, advance tax applies. This covers several groups who are often unaware of the requirement:
- Salaried employees with other income, such as substantial interest from fixed deposits, rental income, or capital gains from selling shares, mutual funds or property. Your employer deducts TDS only on your salary.
- Freelancers, consultants and professionals whose clients deduct TDS at a rate lower than their actual tax rate.
- Business owners, including those under the presumptive taxation scheme.
- Investors who book significant capital gains during the year.
Who is exempt: a resident individual who is a senior citizen, that is, aged 60 or more at any time during the tax year, and who has no income from business or profession, does not have to pay advance tax. Such a person pays any balance tax as self-assessment tax before filing the return. A senior citizen who runs a business or practises a profession is subject to the normal ₹10,000 rule.
Advance tax due dates for FY 2026-27
| Due date | Cumulative amount to be paid | Status |
|---|---|---|
| 15 June 2026 | At least 15% of estimated advance tax | Passed |
| 15 September 2026 | At least 45%, less amount already paid | Passed |
| 15 December 2026 (Tuesday) | At least 75%, less amount already paid | Upcoming |
| 15 March 2027 (Monday) | 100%, less amount already paid | Upcoming |
Any tax paid on or before 31 March 2027 is treated as advance tax for the year. If you missed the June or September instalment, the interest on that shortfall is already fixed; what you can still control is the December instalment. Bringing your cumulative payment up to 75% by 15 December avoids a further three months’ interest on the December shortfall.
Presumptive taxpayers: one instalment
Small businesses and professionals who declare income under the presumptive taxation scheme in Section 58 of the new Act (formerly Sections 44AD and 44ADA) may pay their entire advance tax in a single instalment by 15 March, under Section 408(2). This relaxation does not extend to goods carriage operators under the presumptive scheme formerly known as Section 44AE.
How to calculate your advance tax
- Estimate your income for the full year from all sources: salary, interest, rent, capital gains already booked, business or professional income.
- Decide your tax regime. The new regime is the default. Under the old regime, deduct items such as Section 123 (formerly 80C) investments and Section 126 (formerly 80D) health insurance premiums.
- Compute tax at the applicable rates, including the rebate under Section 156 (formerly 87A) where you qualify, special rates on capital gains, and 4% health and education cess.
- Subtract expected TDS and TCS. Your Annual Information Statement (AIS) and Form 26AS on the e-filing portal show what has been deducted so far.
- If the balance is ₹10,000 or more, pay it according to the schedule above, after deducting any advance tax already paid.
Your estimate can be revised at each instalment. If your income rises in the second half of the year, increase the next instalment; if it falls, reduce it. Our guide to the old vs new tax regime for FY 2026-27 can help you work out the tax itself.
Interest for late or short payment
Two separate interest provisions apply. Both charge simple interest of 1% per month, and a part of a month is counted as a full month.
- Section 425 (formerly 234C), for deferment of instalments: charged on the shortfall against each instalment, for 3 months each for the June, September and December instalments and for 1 month for the March instalment. No interest is charged on the first two instalments if you paid at least 12% by 15 June and at least 36% by 15 September.
- Section 424 (formerly 234B), for default in payment: charged if the advance tax paid by 31 March is less than 90% of the tax finally assessed. Interest runs on the unpaid amount from 1 April after the tax year until the tax is paid.
Filing your return after the due date attracts separate interest under Section 423 (formerly 234A), along with a late fee.
An illustrative example
Suppose a consultant’s tax liability for tax year 2026-27, after TDS, is ₹1,20,000. The table below shows the interest payable in four situations. Figures are illustrative.
| Situation | Interest under Section 425 | Interest under Section 424 | Total interest |
|---|---|---|---|
| Paid every instalment on time (₹18,000, ₹36,000, ₹36,000, ₹30,000) | Nil | Nil | Nil |
| Paid June and September on time, missed December, paid the balance on 15 March | ₹1,080 (₹36,000 shortfall × 1% × 3 months) | Nil | ₹1,080 |
| Paid nothing until 15 March, then paid ₹1,20,000 | ₹4,860 (₹540 + ₹1,620 + ₹2,700) | Nil | ₹4,860 |
| Paid no advance tax; paid the full tax on 31 July 2027 while filing | ₹6,060 (including ₹1,200 for the March instalment) | ₹4,800 (₹1,20,000 × 1% × 4 months) | ₹10,860 |
The amounts are modest compared to the tax, but they are avoidable, and they cannot be claimed as a deduction.
Relief for capital gains and dividends
You cannot be expected to pay tax on income you did not know about. If a shortfall arises because of capital gains, dividend income, lottery or similar winnings, or business income arising for the first time, no deferment interest is charged on that portion, provided you pay the tax on it in the remaining instalments after the income arises, or by 31 March if it arises after 15 March. If you sell mutual fund units or shares at a gain in the coming months, include the tax on that gain in your next instalment. Our article on tax-gain and tax-loss harvesting explains how to plan such sales.
How to pay advance tax online
- Log in to the Income Tax e-filing portal and select e-File, then e-Pay Tax, then New Payment. You can also use the e-Pay Tax option under Quick Links with your PAN and a mobile OTP, without logging in.
- Choose Income Tax, select tax year 2026-27, and select the minor head Advance Tax (100).
- Enter the amount and pay through net banking, debit card, UPI or another available mode.
- Save the challan receipt. Note the BSR code and challan serial number, which you will need while filing your return. Check that the payment appears in Form 26AS after a few days.
Selecting the wrong minor head, such as self-assessment tax, or the wrong tax year is a common error. Check both before you pay.
Practical tips
- Set aside tax as you earn. Freelancers and business owners can transfer a fixed share of each receipt to a separate savings account or liquid fund, so the money is ready on the due date. See our guide to financial planning for the self-employed.
- Review your AIS before each instalment to see the interest and other income already reported against your PAN.
- Do not overpay deliberately. Excess advance tax is refunded with interest after you file your return, but the money is locked up in the meantime.
- Pay a day or two early. Bank and portal delays close to the due date are common.
Frequently asked questions
Do salaried employees need to pay advance tax?
Only if their tax liability not covered by TDS is ₹10,000 or more. This usually happens when they have significant interest, rent or capital gains in addition to salary.
What happens if I miss the 15 December advance tax instalment?
You pay interest of 1% per month for 3 months on the shortfall against 75% of your tax under Section 425. Pay the balance as soon as possible and in any case by 15 March to avoid further interest.
Do senior citizens have to pay advance tax?
Resident senior citizens aged 60 or more who have no business or professional income are exempt. They pay any balance tax as self-assessment tax before filing the return.
Is advance tax payable on capital gains from mutual funds and shares?
Yes. Tax on capital gains counts towards your advance tax liability. Since gains cannot be predicted, you are not charged deferment interest if you pay the tax on them in the instalments falling due after the gain arises.
Can I pay all my advance tax on 15 March?
Only presumptive taxpayers under Section 58 may do so without interest. Others will pay deferment interest under Section 425 for the missed June, September and December instalments.
Related reading: old vs new tax regime for FY 2026-27, tax-gain and tax-loss harvesting before 31 March, financial planning for self-employed professionals, and taxes of the Government of India.
Disclaimer: The example is illustrative and simplified; actual interest depends on the exact amounts and dates and on the rounding rules in the Income-tax Rules. This article is based on publicly reported provisions of the Income-tax Act 2025 as of November 2026, which may change. It is general information, not tax advice. Consult a chartered accountant or qualified tax professional before making decisions. Mungekar Wealth accepts no liability for any loss arising from reliance on this article.
