What is advance tax?
Advance tax is income tax paid during the year you earn the income, rather than after it. India runs on a pay-as-you-earn principle, and advance tax is how that applies to income nobody deducted TDS from.
It becomes due when your total tax liability after TDS exceeds ₹10,000 in a financial year.
Advance tax due dates
Four instalments, each a cumulative percentage of your full-year liability:
| Due date | Cumulative | Meaning |
|---|---|---|
| 15 June | 15% | 15% of the year's tax paid by this date |
| 15 September | 45% | a further 30% |
| 15 December | 75% | a further 30% |
| 15 March | 100% | the balance |
They are cumulative, not equal quarters. Missing June and paying 45% in September clears the September requirement but leaves the June shortfall chargeable.
Do salaried employees have to pay advance tax?
Usually not. Your employer deducts TDS on salary every month, and that counts toward the same liability — so salary alone rarely leaves ₹10,000 outstanding.
It becomes your problem when you have income the employer knows nothing about:
- Capital gains on shares, mutual funds or property.
- Interest on fixed deposits and savings beyond what TDS covered.
- Rental income.
- Freelance or consulting fees alongside a job.
- Dividends, which have been taxable in the recipient's hands since FY 2020-21.
A single large capital gain is the most common trigger. Sell an appreciated holding in May and the tax on that gain is due in instalments starting 15 June, not next July when you file.
Interest for late or short payment: 234B and 234C
Two separate charges, and they can both apply:
- Section 234C — interest for missing an instalment or paying it short. 1% per month on the shortfall, for three months per missed instalment (one month for the March instalment).
- Section 234B — interest for still being short after the year ends. 1% per month from 1 April until you pay, charged when advance tax paid is under 90% of the assessed liability.
Neither is a penalty in the punitive sense; both are simple interest on money the government considers it should already have had. That also makes them entirely avoidable by paying on time.
Advance tax on capital gains you could not have predicted
You cannot forecast a gain you had not yet made, and the law accepts that. Capital gains, lottery winnings and dividend income are treated specially: no 234C interest is charged for failing to estimate them in an earlier instalment, provided you pay the tax on them in the instalment falling due after the gain arises, or by 15 March.
So a gain realised in November attaches to the 15 December instalment, not retroactively to June and September.
How to pay advance tax online
- Go to the Income Tax e-filing portal, or your bank's tax payment section.
- Choose Challan ITNS-280.
- Select (100) Advance Tax as the payment type — not self-assessment tax, which is a different code for a payment made after the year has ended.
- Enter your PAN and the correct assessment year, which is the year after the one you are earning in.
- Pay by net banking, UPI or card, and save the challan with its BSR code and challan serial number.
Those two identifiers are what you enter in the ITR to claim credit. The payment should also appear in your Form 26AS and AIS within a few days; if it does not, that is worth chasing before filing rather than after.
What if I overpay advance tax?
You claim it back through your return. Excess advance tax is refunded after the ITR is processed, with interest at 6% per annum under Section 244A.
Refunds generally arrive within 30 to 90 days of filing, into the pre-validated bank account linked to your PAN.
Advance tax for freelancers and presumptive taxpayers
Anyone taxed under the presumptive schemes — Section 44AD for business, 44ADA for professionals — pays advance tax in a single instalment by 15 March. The four-date schedule does not apply.
The eligibility limits are ₹75 lakh of professional receipts under 44ADA and ₹3 crore of business turnover under 44AD, in both cases where at least 95% of receipts are non-cash.
Freelancers not using a presumptive scheme follow the ordinary four-instalment calendar, which means estimating a full year's income in June from three months of invoices. Revising that estimate upward at each subsequent date is normal and carries no penalty, so long as the cumulative percentage due by each date has been met.
Senior citizens without business income
A resident individual aged 60 or above with no income from business or profession is exempt from advance tax entirely, however large the liability. They pay it as self-assessment tax before filing instead.
The exemption depends on the absence of business income, not on the size of the tax. A retired person with substantial interest and capital gains still qualifies; one running a consultancy does not.