Advance income tax, commonly called “pay as you earn,” requires taxpayers to pay their tax liability in the same financial year the income is earned, but in instalments rather than a single lump sum. Payments can be made easily online via the Income Tax Department’s e‑filing portal.
Certain rules determine who must pay advance tax and how amounts are calculated. The following overview explains who is liable, key due dates, how to compute the amount, the online payment process, and consequences for late or missed payments.
Who Should Pay Advance Tax
You are required to pay advance tax if any of the following situations apply to you:
- Salaried individuals, freelancers or business owners: If your total tax liability for the year is ₹10,000 or more after accounting for TDS/TCS, you must pay advance tax.
- Senior citizens: Residents aged 60 or above who do not have business income are generally exempt from advance tax. However, if a senior citizen has income from business or profession, advance tax rules apply.
- Presumptive taxation — business: Taxpayers who opt for the presumptive taxation scheme under Section 44AD must pay advance tax for the relevant year.
- Presumptive taxation — professionals: Professionals covered by Section 44ADA (for example, doctors, lawyers, architects) who choose the presumptive scheme are also required to pay advance tax.
Dates for Payment of Advance Tax
Paying instalments on time helps avoid interest and penalties. The instalment schedule for the financial year 2024–25 is as follows:
| Due Date | Advance Tax Payment Percentage |
|---|---|
| On or before 15th June | 15% of estimated tax |
| On or before 15th September | 45% of estimated tax (less tax already paid) |
| On or before 15th December | 75% of estimated tax (less tax already paid) |
| On or before 15th March | 100% of estimated tax (less tax already paid) |
| On or before 15th March | 100% of tax for taxpayers under presumptive taxation (Sections 44AD and 44ADA) |
Calculation of Advance Tax
Compute your advance tax in a few straightforward steps:
- Step 1: Estimate total income for the year from all sources such as salary, capital gains, interest, rental income and professional receipts.
- Step 2: Add income elements to arrive at gross taxable income, including salary where applicable.
- Step 3: Apply the deductions you are eligible for under the chosen tax regime to determine net taxable income.
- Step 4: Calculate tax payable on the net taxable income using the applicable income tax rates for the year.
- Step 5: Subtract tax already deducted at source (TDS) or tax collected at source (TCS) and any other tax credits expected to be available during the year.
- Step 6: If the remaining tax liability after TDS/TCS exceeds ₹10,000, that balance is the advance tax you must pay in instalments according to the schedule.
Process to Pay Advance Tax Online
Paying advance tax online through the Income Tax Department’s e‑filing portal is straightforward. The typical steps are:
- Step 1: Visit the e‑filing portal of the Income Tax Department.
- Step 2: Under the Quick Links section select “e‑Pay Tax.”
- Step 3: Enter your PAN and re‑enter it for verification, then provide your mobile number and continue.
- Step 4: Verify with the 6‑digit OTP sent to your mobile, then proceed.
- Step 5: Choose the “Income Tax” category and continue.
- Step 6: Select the appropriate Assessment Year (for example, 2025‑26) and choose “Advance Tax (100)” as the Type of Payment.
- Step 7: Enter the tax payment details and amount to be paid.
- Step 8: Pick a payment mode and the bank for processing the payment.
- Step 9: Review the challan and confirm by clicking “Pay Now.”
- Step 10: After successful payment an acknowledgement or challan counterfoil will appear on screen; save or print this for your records.
Late Payment Interest on Advance Tax
Interest may be levied for delayed or non‑payment of advance tax under Sections 234B and 234C:
- Non‑payment — Section 234B: If you do not have at least 90% of your total tax liability covered by TDS/TCS or advance tax by the end of the financial year, interest under Section 234B applies. The typical interest is 1% per month on the shortfall.
- Delayed instalments — Section 234C: If instalments are not paid on time, interest under Section 234C applies at 1% per month for specified shortfall periods on the prescribed percentage of estimated tax due on each instalment date.
| Particulars | Rate of Interest | Period of Interest | Base Amount for Interest |
|---|---|---|---|
| If advance tax paid by 15th June is less than 15% | 1% per month | 3 months | 15% of estimated tax minus tax paid before June 15 |
| If advance tax paid by 15th September is less than 45% | 1% per month | 3 months | 45% of estimated tax minus tax paid before September 15 |
| If advance tax paid by 15th December is less than 75% | 1% per month | 3 months | 75% of estimated tax minus tax paid before December 15 |
| If advance tax paid by 15th March is less than 100% | 1% per month | 1 month | 100% of estimated tax minus tax paid before March 15 |
Understanding these provisions helps you plan payments to avoid interest and penalties. Save challans and payment receipts as proof of compliance.
FAQs on Advance Tax
How is interest calculated on advance tax?
Interest on late or missed advance tax payments is generally charged at 1% per month. The exact base and duration depend on whether Section 234B or 234C applies and on which instalment date a shortfall occurred.
What is meant by advance tax?
Advance tax means paying estimated tax liabilities during the same financial year in which income is earned. It is required when the net tax payable after TDS/TCS is ₹10,000 or more.
How do Sections 234B and 234C differ?
Both sections levy interest at 1% per month, but Section 234C applies to shortfalls in scheduled instalments during the financial year, while Section 234B applies when adequate tax has not been paid by the end of the year (usually when less than 90% of tax liability is covered by TDS/TCS or advance tax).
What is the advance tax calculation period?
The calculation period for advance tax is the financial year for which you will file the income tax return. Estimate income and tax for that year to determine instalment amounts.