Paying income tax does not always mean waiting until you file your income tax return. For taxpayers whose estimated tax liability crosses the prescribed threshold, income tax may need to be paid during the financial year itself through advance tax. This is particularly relevant when income comes from sources such as interest, rent, capital gains, or business and professional activities where tax may not be fully covered through TDS. Understanding advance tax requirements can help taxpayers manage their liabilities and avoid interest for shortfalls or delayed payments. If you're handling tax filing in Noida, knowing when advance tax applies can make tax planning much easier.
What Is Advance Tax?
Advance tax is income tax paid during the financial year instead of waiting until the end of the year to pay the entire tax liability.
The requirement applies when the tax payable during the year, after considering the applicable tax provisions, reaches the prescribed threshold. Under the Income Tax Act, 2025, advance tax is payable when the amount of tax payable during the year is ₹10,000 or more. The Income Tax Department confirms that this threshold remains unchanged from the earlier law.
For many salaried taxpayers, TDS deducted by their employer may cover much of their tax liability. However, additional income such as interest, rental income, capital gains, or income from business or profession can result in an additional tax liability that needs to be considered when calculating advance tax.
Who Needs to Pay Advance Tax?
A taxpayer generally needs to pay advance tax when their estimated tax liability for the year reaches the applicable ₹10,000 threshold, after considering the relevant tax credits and provisions.
This can apply to individuals as well as businesses and professionals. It isn't limited to people who earn income from a salary.
For example, a salaried individual may have additional taxable income from rent, interest, or capital gains. Similarly, a business owner or professional may have tax liability arising from business or professional income.
There is an important exception for certain senior citizens. Under the earlier Income-tax Act, 1961, a resident senior citizen who does not have income from business or profession is not liable to pay advance tax. The Income Tax Department continues to state this relief for applicable senior citizens.
When Do You Pay Advance Tax?
For taxpayers who pay advance tax in instalments, the payments are spread across the financial year.
For individuals under the standard instalment system, the Income Tax Department specifies:
These percentages are cumulative. This means that by 15 September, the taxpayer should have paid at least 45% of the estimated annual advance tax liability in total, rather than another 45% on top of the June payment.
Taxpayers under certain presumptive taxation provisions have a different payment arrangement. For example, eligible taxpayers using the presumptive taxation scheme under Section 44ADA are required to pay 100% of their advance tax by 15 March.
How Is Advance Tax Calculated?
The basic idea is to estimate your total tax liability for the financial year and then account for taxes that are already expected to be collected or paid through other mechanisms.
A taxpayer may need to consider:
- Expected taxable income for the year
- Applicable tax rates
- Tax deducted at source (TDS)
- Tax collected at source (TCS), where applicable
- Applicable tax reliefs or credits
- Advance tax already paid during the year
The remaining liability is then considered when determining the advance tax payable.
The Income Tax Department's tax computation framework separately identifies advance tax, TDS, TCS and self-assessment tax when determining the taxpayer's overall tax position.
Because income can change during the year, advance tax calculations are estimates and may need to be reassessed as the taxpayer's financial position changes.
What Happens If You Don't Pay Enough Advance Tax?
Failing to pay sufficient advance tax can result in interest under the applicable provisions.
Under the Income Tax Act, 2025, the Income Tax Department states that interest for default in payment of advance tax is covered under Section 424, corresponding to Section 234B of the earlier Income-tax Act, 1961. Interest for deferment of advance tax instalments is covered under Section 425, corresponding to Section 234C of the earlier Act. The applicable interest rate remains unchanged at 1% per month or part of a month for the specified periods.
The exact interest implications depend on the nature and extent of the shortfall and the applicable statutory conditions.
This is why taxpayers with significant non-salary income should not wait until the ITR filing stage to discover that their TDS was insufficient.
Can You Adjust Advance Tax If Your Income Changes?
Yes. Advance tax is based on an estimate of the taxpayer's income and tax liability for the year. If that estimate changes during the financial year, the taxpayer can reassess the expected liability and adjust subsequent payments accordingly.
For example, a business may initially expect a certain level of profit but later earn more than anticipated. Similarly, an unexpected capital gain or additional source of income can increase the estimated tax liability.
Reassessing the liability during the year can help ensure that the total advance tax paid is closer to the actual tax payable rather than relying entirely on an estimate made at the beginning of the year.
Why Work With a Professional
Keeping track of multiple compliance deadlines is easier said than done, especially when you're also managing customers, employees, and day-to-day operations. Missing even a single filing can lead to penalties, additional paperwork, and unnecessary stress. Working with a qualified Chartered Accountant helps businesses stay organized, meet statutory deadlines on time, and avoid costly compliance mistakes before they happen.
At Shalini Arora & Company, we help businesses with:
✅ Income tax return filing and compliance
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Conclusion
Advance tax allows taxpayers to pay income tax during the financial year rather than waiting until the income tax return is filed. Taxpayers whose estimated tax liability reaches the applicable threshold may need to make advance tax payments, while specific rules and exceptions apply to different categories of taxpayers.
Keeping track of income throughout the year, accounting for TDS and other taxes already paid, and reassessing estimated liability when circumstances change can help taxpayers meet their advance tax obligations more effectively.
Frequently Asked Questions
1. What is advance tax?
Advance tax is income tax paid during the financial year in instalments rather than paying the entire applicable tax liability when filing the income tax return.
2. Who needs to pay advance tax?
Generally, taxpayers whose estimated tax liability for the year is ₹10,000 or more after considering applicable provisions need to pay advance tax. Certain exceptions apply, including for eligible resident senior citizens without business or professional income.
3. What are the advance tax payment dates?
For taxpayers following the standard instalment system, the cumulative payment targets are 15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March.
4. Is advance tax applicable to salaried individuals?
It can be. If TDS from salary does not cover the taxpayer's overall tax liability and the applicable threshold is met, advance tax may be required on the remaining liability.
5. What happens if I don't pay enough advance tax?
Interest may apply for default or deferment of advance tax under the applicable provisions. The exact calculation depends on the amount and nature of the shortfall.
6. Can I change my advance tax calculation during the year?
Yes. Since advance tax is based on estimated income and tax liability, taxpayers can reassess their expected liability as their income or circumstances change and adjust subsequent payments accordingly.
Disclaimer: This article is intended for general informational purposes only and should not be considered legal, tax, or financial advice. Advance tax requirements, thresholds, payment schedules, and applicable provisions can vary based on the taxpayer and relevant tax year. Please consult a qualified professional for advice specific to your circumstances.
Published by Shalini Arora & Company
Tags: Tax Filing in Noida, Advance Tax, Advance Tax Payment, Income Tax, Income Tax Filing, Tax Planning, Tax Compliance, Advance Tax Due Dates, Business Tax, Tax Liability