Introduction

Advance Tax is a mechanism under the Income-tax Act, 1961 that requires taxpayers to pay income tax in installments during the financial year instead of paying the entire tax liability at the time of filing the Income Tax Return (ITR). This system ensures a steady flow of tax revenue to the government and helps taxpayers avoid a large tax burden at year-end.

Whether you are a salaried employee with additional income, freelancer, consultant, professional, business owner, investor, landlord, or company, understanding Advance Tax provisions is essential to avoid interest and penalties.

This guide explains Advance Tax applicability, due dates for FY 2026-27 (AY 2027-28), calculation methods, payment process, and consequences of non-compliance.

What is Advance Tax?

Advance Tax is the income tax payable in installments during the financial year based on estimated income.

It is often referred to as:

"Pay As You Earn Tax"

Instead of waiting until the end of the year, taxpayers pay tax as income is earned.

Who is Liable to Pay Advance Tax?

Advance Tax is payable when:

Estimated Tax Liability Exceeds ₹10,000

during the financial year after considering:

• TDS
• TCS
• Reliefs and credits available

Applicable taxpayers include:

✔ Businesses

✔ Professionals

✔ Freelancers

✔ Consultants

✔ Landlords

✔ Investors

✔ Companies

✔ Partnership Firms

✔ LLPs

✔ Individuals with non-salary income

Who is Exempt from Advance Tax?

Senior citizens are generally exempt if:

• They are residents in India; and
• They do not have income chargeable under the head "Profits and Gains of Business or Profession."

Advance Tax Due Dates for FY 2026-27

For Individuals, Firms, LLPs & Companies

15th June 2026

Minimum 15% of total Advance Tax liability.

15th September 2026

Minimum 45% of total Advance Tax liability (cumulative).

15th December 2026

Minimum 75% of total Advance Tax liability (cumulative).

15th March 2027

Minimum 100% of total Advance Tax liability.

Advance Tax Schedule

Advance Tax for Presumptive Taxation Scheme

Taxpayers opting for presumptive taxation under sections such as:

• Section 44AD
• Section 44ADA

generally pay:

100% Advance Tax

on or before:

15 March 2027

instead of quarterly installments.

How to Calculate Advance Tax?

Step 1: Estimate Total Income

Include income from:

• Business
• Profession
• Salary
• House Property
• Capital Gains
• Interest Income
• Other Sources

Step 2: Compute Tax Liability

Calculate tax according to the applicable income tax regime.

Include:

• Surcharge (if applicable)
• Health & Education Cess

Step 3: Deduct TDS/TCS

Reduce:

• TDS already deducted
• TCS available
• Tax credits

Step 4: Determine Net Tax Payable

The balance amount represents Advance Tax liability.

Example of Advance Tax Calculation

Estimated Income

₹20,00,000

Estimated Tax Liability

₹3,50,000

Less: TDS

₹50,000

Net Advance Tax Payable

₹3,00,000

Installments would generally be:

How to Pay Advance Tax Online?

Advance Tax can be paid through the Income Tax Portal.

Steps

Step 1

Visit the Income Tax e-Pay Tax facility.

Step 2

Select: Income Tax

Step 3

Choose: Advance Tax (100)

Step 4

Enter PAN and assessment details.

Step 5

Select payment mode.

Step 6

Complete payment and save challan receipt.

Challan for Advance Tax

Advance Tax is generally paid through:

Challan ITNS 280

Ensure correct selection of:

• Assessment Year
• Tax Type
• PAN
• Payment Category

Incorrect challan details may lead to credit mismatches.

Interest for Non-Payment of Advance Tax

Failure to pay Advance Tax may attract interest under:

Section 234B

Applicable when:

• Less than 90% of assessed tax is paid.

Interest is generally charged at 1% per month or part thereof.

Section 234C

Applicable when:

• Required installments are not paid on time.

Interest is charged for deferment of Advance Tax installments.

Common Mistakes Taxpayers Make

Many taxpayers:

❌ Ignore capital gains income.

❌ Forget interest income.

❌ Do not consider rental income.

❌ Underestimate business profits.

❌ Pay under wrong assessment year.

❌ Ignore advance tax after receiving large professional receipts.

These mistakes often result in interest liability.

Advance Tax for Freelancers and Consultants

Freelancers earning through:

• Digital services
• Consulting
• Marketing
• Design services
• IT services

must evaluate Advance Tax regularly because income often fluctuates during the year.

Periodic review helps avoid large March payments and interest charges.

Advance Tax for Investors

Investors should also consider:

• Capital gains
• Dividend income
• Interest income
• Foreign income

while estimating Advance Tax liability.

Benefits of Timely Advance Tax Payment

Avoid Interest Liability

Reduces exposure to Sections 234B and 234C.

Better Financial Planning

Spreads tax burden across the year.

Improved Cash Flow Management

Avoids large year-end tax payments.

Smooth ITR Filing

Ensures tax credits reflect properly in Form 26AS and AIS.

Conclusion

Advance Tax is an important compliance requirement for taxpayers whose estimated tax liability exceeds ₹10,000 during the financial year. For FY 2026-27, taxpayers must ensure timely payment of installments due on 15 June, 15 September, 15 December, and 15 March to avoid interest under Sections 234B and 234C.

Accurate income estimation, proper tax planning, and periodic review of earnings can help individuals and businesses remain compliant while managing cash flows efficiently.

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