5.Advance Tax — Applicability, Calculation & Due Dates
Advance Tax is a system of paying Income Tax during the financial year itself instead of paying the entire amount at year-end. It follows the principle of “pay as you earn.”
Under both the Income-tax Act, 1961 and the Income-tax Act, 2025 (effective from 01/04/2026), Advance Tax remains an important compliance mechanism to ensure timely tax collection.
1. Introduction
Advance Tax refers to payment of Income Tax in instalments during the year based on estimated income. It prevents accumulation of large tax liability at the time of return filing.
The responsibility of calculating and paying Advance Tax lies on the taxpayer. Failure to comply may result in interest liability under the Income Tax provisions.
Advance Tax applies not only to businesses but also to salaried individuals, professionals, freelancers, and investors in certain cases.
Advance Tax is based on estimated annual income.
Advance Tax is based on estimated annual income.2. Applicability of Advance Tax
Advance Tax becomes applicable when the estimated tax liability for the year exceeds ₹10,000 after considering TDS and reliefs.
It applies to all categories of taxpayers unless specifically exempted under the law. The objective is to ensure gradual payment of taxes during the year itself.
Taxpayers liable for Advance Tax may include:
- Business owners
- Professionals
- Freelancers
- Investors earning capital gains
- Individuals with multiple income sources
Liability is determined after reducing TDS and tax credits.
Liability is determined after reducing TDS and tax credits.3. Persons Exempt from Advance Tax
Certain taxpayers are specifically exempt from payment of Advance Tax. This relaxation is mainly available to senior citizens under prescribed conditions.
A resident senior citizen not having income from business or profession is generally not required to pay Advance Tax.
However, if business or professional income exists, exemption may not be available.
Exempt category:
- Resident senior citizen
- No business/professional income
Exemption applies only when specified conditions are satisfied.
Exemption applies only when specified conditions are satisfied.4. Calculation of Advance Tax
Advance Tax is calculated on estimated total income for the year. The taxpayer must estimate total tax liability after considering deductions and exemptions.
From the total tax liability, TDS, reliefs, and tax credits are reduced to determine the net Advance Tax payable.
The calculation generally involves the following steps:
Step 1 — Estimate Total Income
Include income from all applicable heads:
- Salary
- Business/Profession
- Capital Gains
- Other Sources
Step 2 — Claim Deductions
Reduce eligible deductions such as:
- Section 80C
- Section 80D
- Housing loan benefits
Step 3 — Calculate Tax Liability
Apply slab rates based on selected regime.
Step 4 — Reduce TDS & Credits
Deduct:
- TDS
- Reliefs
- Foreign tax credits (if applicable)
Balance amount becomes Advance Tax liability.
Balance amount becomes Advance Tax liability.5. Due Dates of Advance Tax
Advance Tax is payable in instalments during the year. Different percentages are prescribed for each due date.
Failure to pay the required percentage may attract interest under Sections 234B and 234C.
Advance Tax Due Dates
On or before 15th June
15%
On or before 15th September
45%
On or before 15th December
75%
On or before 15th March
100%
These percentages are cumulative in nature.
Proper instalment planning avoids interest liability.
Proper instalment planning avoids interest liability.6. Advance Tax for Presumptive Taxation
Taxpayers opting for presumptive taxation schemes have simplified Advance Tax requirements.
Instead of paying quarterly instalments, they are generally required to pay the entire Advance Tax by 15th March.
This simplifies compliance for small businesses and professionals opting for presumptive schemes.
Applicable mainly under:
- Section 44AD
- Section 44ADA
- Section 44AE
Presumptive taxpayers have simplified due dates.
Presumptive taxpayers have simplified due dates.7. Interest for Non-Payment or Short Payment
Interest is levied where Advance Tax is not paid or is paid inadequately. These provisions ensure timely tax compliance.
Two major interest provisions generally apply:
Section 234B
Applicable where:
- Advance Tax paid is less than 90% of total liability
Section 234C
Applicable for:
- Delay or shortfall in instalments
Interest increases the total tax burden significantly.
Delayed compliance results in additional cost.
Delayed compliance results in additional cost.8. Practical Examples
Practical understanding helps in proper Advance Tax planning.
Example 1 — Freelancer
Estimated tax liability = ₹1,20,000TDS available = ₹20,000
Advance Tax payable = ₹1,00,000
Example 2 — Salaried Individual
Salary fully covered under TDS → No Advance Tax liability.
However, additional capital gains or interest income may trigger liability.
Additional income often creates Advance Tax obligations.
Additional income often creates Advance Tax obligations.9. Common Mistakes
Taxpayers frequently ignore Advance Tax obligations due to lack of awareness. This results in interest and notices.
Common mistakes include:
- Ignoring interest income
- Not considering capital gains
- Assuming TDS is sufficient
- Missing due dates
- Incorrect estimation of income
Small estimation errors can increase tax cost.
Small estimation errors can increase tax cost.10. Practical Guidance
Advance Tax should be reviewed periodically during the year. Income estimation must be updated whenever significant changes occur.
Maintaining proper records and reviewing AIS/TIS helps in accurate computation.
Best practices:
- Estimate income quarterly
- Track TDS properly
- Pay before due dates
- Review capital gains regularly
Timely review ensures smooth compliance.
Timely review ensures smooth compliance.11. CABTA Insight
“Advance Tax is not merely a payment mechanism — it is a continuous tax planning exercise.”
At Brijesh Thakar & Associates, we advise clients on accurate income computation and return filings.
Disclaimer
The information contained in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. Each case requires specific evaluation based on facts and applicable laws. Readers are advised to seek professional advice before taking any action.
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