Advance Tax: Applicability, Due dates and Procedures

Why wait until the last minute to settle your taxes? Advance tax ensures that individuals and businesses pay their taxes in instalments throughout the financial year, preventing a large lump sum payment at the end. If you earn income beyond your regular income—such as from rent, capital gains, business profits, interest or freelance work—you may be required to pay advance tax.  In this guide, we break down everything you need to know about advance tax, its due dates, calculation methods, procedures and interest for short/delayed payment.

IMPORTANT NOTE: The due date for the fourth instalment of advance tax is "15th March 2025" for FY 2024-25.

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Latest Update: 

Advance Tax Payment for FY 2025–26: Deadline Shifted to June 16, 2025

Since June 15, 2025—the due date for the first instalment of advance tax for FY 2025–26—falls on a Sunday, taxpayers can make the payment on Monday, June 16, 2025, without facing any penalties or interest. This relaxation is in line with CBDT Circular No. 676, dated 14 January 1994, which allows the next working day as the valid due date when the original deadline falls on a public holiday or Sunday. Taxpayers are advised to take advantage of this extended window to stay compliant and avoid any last-minute issues.  

What is Advance Tax?

Advance tax is the income tax paid in instalments throughout the financial year instead of a lump sum at the end. It follows the "pay-as-you-earn" approach, requiring taxpayers to make payments on specified due dates mentioned by the Income Tax Department.

Who is Liable to Pay Advance Tax?

As per Section 208 of Income Tax Act, Advance tax must be paid by individuals and entities whose estimated tax liability for a financial year is ₹10,000 or more. The following categories of taxpayers are required to pay advance tax:

1. Individuals (Including Salaried Employees)

If your total tax liability, after adjusting for TDS (Tax Deducted at Source), is expected to be ₹10,000 or more in a financial year, you must pay advance tax.

2. Self-Employed Individuals and Professionals

Freelancers, consultants and individuals earning income through business or profession must pay advance tax if their estimated tax liability exceeds ₹10,000.

3. Corporate Entities

All companies, whether public or private, are liable to pay advance tax based on their revenue and profits.

4. Partnership Firms and LLPs

Partnership firms and Limited Liability Partnerships (LLPs) must also pay advance tax if their estimated tax liability exceeds ₹10,000.

5. Non-Resident Taxpayers

Non-resident individuals and foreign companies earning income in India are required to pay advance tax if their tax liability crosses ₹10,000.

6. Individuals Earning Capital Gains

Taxpayers earning capital gains from the sale of assets such as real estate, stocks, or other investments must pay advance tax if their total tax liability from these gains exceeds ₹10,000.

7. Senior Citizens with Business Income

Senior citizens earning income from a business or profession in a financial year are required to pay advance tax. However, resident senior citizens without business/professional income are exempt.

8. Taxpayers Under Presumptive Taxation Scheme

Businesses opting for the Presumptive Taxation Scheme under Section 44AD

• Taxpayers under this scheme must pay the entire advance tax amount on or before 15th March.

Professionals under the Presumptive Taxation Scheme (Section 44ADA)

• Independent professionals (doctors, lawyers, architects, etc.) under this scheme must also pay their entire advance tax on or before 15th March.

Example:

In this case, although the total estimated tax liability exceeds ₹10,000, the tax liability after TDS is only ₹5,000. As the net tax due is below ₹10,000, the taxpayer is not liable to pay advance tax.

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Due Dates for payment of Advance Tax

As per Section 211 of Income Tax Act,  the due dates for advance tax payments are given below:

For Regular Taxpayers

For Taxpayers Under Presumptive Taxation Scheme (Sections 44AD & 44ADA)

The upcoming deadline to pay advance tax is 15th March 2025. Ensure timely payment to avoid interest and stay tax-compliant.

Interest for default in payment of Advance Tax

Failure to pay advance tax on time attracts interest under Sections 234B and 234C of the Income Tax Act.

Interest Under Section 234B (Short-Payment of Advance Tax)

If there is a failure to pay advance tax or at least 90% of total tax is not paid by 31st March, interest is charged at 1% per month or part of a month on the unpaid amount.

Interest Under Section 234C (Delay in payment of Advance Tax)

Interest is levied if advance tax is not paid as per the prescribed due dates:

Important Note: No interest under Section 234C will be charged if at least 12% of advance tax is paid in the first instalment and upto 36% in the second instalment.

Timely payment of advance tax helps avoid unnecessary interest and ensures tax compliance.

How is the Advance Tax Payment done?

Follow these simple steps to pay your advance tax online through the Income Tax Department's e-filing portal.

• Step 1: Visit the e-Filing Portal – Go to the official Income Tax e-filing portal.
• Step 2:Access ‘e-Pay Tax’ – Click on the ‘e-Pay Tax’ option under the ‘Quick Links’ section on the homepage, or search for ‘e-Pay Tax’ in the search bar.
• Step 3: Enter PAN & Mobile Number – Provide your PAN, confirm it and enter your mobile number. Click ‘Continue’.
• Step 4: Verify with OTP – Enter the 6-digit OTP sent to your mobile number and proceed.
• Step 5:Select Tax Payment Type – Choose ‘Income Tax’ as the payment category and click ‘Proceed’.
• Step 6:Choose Assessment Year & Payment Type – Select ‘Assessment Year 2025-26’ and ‘Advance Tax (100)’, then click ‘Continue’.
• Step 7: Enter Tax Details – Fill in the required tax amount and verify the details.
• Step 8:Choose Payment Method – Select your preferred payment mode (net banking, debit card, UPI, etc.) and your bank, then press ‘Continue’.
• Step 9: Review & Confirm – Check the challan details carefully. Click ‘Pay Now’ to proceed, or select ‘Edit’ if any changes are needed.
• Step 10:Receive Payment Acknowledgment – After successful payment, an acknowledgment with the BSR code and challan serial number will be generated. Save this receipt, as you’ll need these details while filing your income tax return.

Advance Tax Deadline Approaching Fast – Pay by March 15th!

The 15th March 2025 advance tax deadline is fast approaching! Avoid last-minute hassles and penalties—calculate and pay your advance tax on time. Need expert assistance? IndiaFilings can help you file seamlessly.

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FAQs on Advance Tax

1. What is Advance Tax and How Does It Work?

Advance tax is paid in four instalments during the financial year based on estimated income to prevent a lump sum tax burden at year-end. After adjusting advance tax payments, tax deducted at source (TDS) and tax collected at source (TCS), the taxpayer determines whether additional tax is payable or if a refund is due.

2. When should I pay advance tax?

You must pay advance tax if your total tax liability for the year, after adjusting for TDS/TCS, is ₹10,000 or more.

3. How can I correct a mistake in my advance tax challan?

The Income Tax Department allows online corrections for Assessment Year (within 7 days of payment) and Major/Minor Head (within 30 days of payment). Steps to correct a tax challan online include:

• Log in to the e-filing portal.
• Navigate to “Challan Correction” under the Services tab.
• Click on “Create Challan Correction Request.”
• Select the correction type (Assessment Year, Major Head, Minor Head).
• Enter either the Assessment Year or Challan Identification Number (CIN).
• Choose the relevant challan for correction.
• Input the correct details.
• Verify using Aadhaar OTP, DSC, or EVC.
• Upon successful verification, a confirmation message with a transaction ID will be displayed.

4. Are NRIs required to pay advance tax?

Yes, NRIs with a tax liability of ₹10,000 or more in India must pay advance tax.

5. Do senior citizens need to pay advance tax?

Resident senior citizens (60 years or older) with no business or professional income are exempt from paying advance tax.

6. What happens if I fail to pay advance tax?

Non-payment or delay in payment attracts interest under Sections 234B and 234C of the Income Tax Act, 1961.

7. Can deductions under Section 80C be considered while estimating advance tax?

Yes, deductions under Section 80C, 80D, and other eligible sections can be taken into account while calculating advance tax.

8. What if I miss the 15th March deadline for advance tax?

If you miss the 15th March deadline for advance tax payment, you can still pay it by 31st March, and it will still be considered advance tax. However, missing the deadline can lead to interest under Sections 234B and 234C of the Income Tax Act.

9. How do I make an advance tax payment?

Advance tax can be paid online via Challan 280 on the Income Tax Department’s website.

10. Why should advance tax be paid?

Advance tax ensures a steady revenue flow to the government and reduces the year-end tax burden on taxpayers. Non-payment of advance tax may result in interest payment.

11. Can advance tax be paid after the due date?

Yes, but interest at 1% per month will be charged for delays.

12. How to pay advance tax for capital gains?

If capital gains are earned after an advance tax due date, you should pay the tax in the remaining instalments or by 31st March to avoid interest.

13. How to pay advance tax for unpredictable income sources?

For incomes like capital gains or lottery winnings, tax should be paid in the next available instalment or by 31st March.

14. What is the minimum advance tax payment required by 31st March?

At least 90% of the total tax liability must be paid to avoid interest under Section 234B.

15. How is interest calculated for delayed advance tax payments?

Interest under Section 234C is charged at 1% per month for shortfalls in tax payment as per the due dates.