Advance Tax: What It Is & When to Pay
If your tax for the year runs to ₹10,000 or more, the government wants it in instalments through the year — not in one lump at the end. Here's how advance tax works.
What is advance tax?
Advance tax is income tax paid during the financial year in which you earn the income, rather than after it ends — the “pay as you earn” principle. Instead of one payment at filing time, you pay it in four instalments spread across the year.
Who has to pay it?
You must pay advance tax if your total tax liability for the year (after TDS) is ₹10,000 or more. This commonly applies to:
- Salaried people with sizeable capital gains (e.g. from shares, mutual funds or IPO listing gains), interest, rent or other income where enough tax isn’t already deducted.
- Freelancers, professionals and business owners.
The due dates (individuals)
Advance tax is paid in four instalments. Each date has a cumulative target — i.e. the total percentage of your year’s tax that should be paid by that date:
| Due date | Cumulative advance tax payable |
|---|---|
| 15 June | 15% of total tax |
| 15 September | 45% of total tax |
| 15 December | 75% of total tax |
| 15 March | 100% of total tax |
So by 15 September you should have paid at least 45% (not 30%) of your estimated tax for the year, and so on. Any shortfall carries to the next instalment.
A quick example
Say your estimated tax for the year (after TDS) is ₹1,00,000:
- By 15 Jun: ₹15,000 (15%)
- By 15 Sep: ₹45,000 cumulative (another ₹30,000)
- By 15 Dec: ₹75,000 cumulative (another ₹30,000)
- By 15 Mar: ₹1,00,000 cumulative (the final ₹25,000)
What if you miss or underpay?
- Section 234C — interest (1% per month) for deferring an instalment (paying less than the cumulative target by a due date).
- Section 234B — interest (1% per month) if you paid less than 90% of your total tax as advance tax by year-end.
The interest is modest but avoidable — estimating and paying on time saves it.
Capital gains & the “as they arise” relief
You can’t predict capital gains at the start of the year. The law recognises this: if a capital gain arises after an instalment date, the advance tax on it is due in the remaining instalments (or by 15 March), without 234C interest for the earlier instalments — provided you pay it in the instalment following the gain.
How to pay
Pay online at the Income Tax e-filing portal (or your bank) using Challan 280, selecting “(100) Advance Tax” and the correct assessment year. Keep the challan for your records — it reflects in your Form 26AS / AIS.
Frequently asked questions
Is advance tax only for businesses?
No — anyone whose annual tax liability (after TDS) is ₹10,000+ must pay it, including salaried individuals with large capital gains or other untaxed income.
My employer deducts TDS — do I still need to?
Only if TDS doesn’t cover your full liability. Big capital gains or side income often aren’t fully covered by salary TDS, which is when advance tax kicks in.
What if my income estimate changes during the year?
Re-estimate and adjust the next instalment. It’s normal to true-up as the year progresses.
This is general information, not tax advice. Rules and rates change — verify on the Income Tax Department website or with a qualified tax professional.