What Is Advance Tax and Do You Need to Pay It?
Disclaimer: This article is for general information/education and is not investment advice. The information is shared in good faith and for general informational purposes only. Ujjivan SFB does not make any representations or warranties regarding the accuracy, completeness, or reliability of the content.
September 01, 2026
Key point: Advance tax generally applies when your estimated tax payable for the year is ₹10,000 or more after adjusting for TDS, TCS and eligible tax credits.
Income tax is not always paid only when you file your Income Tax Return (ITR). If you expect to have a significant tax liability during the year, you may need to pay part of it in advance. This is known as advance tax. It can apply to salaried employees, freelancers, professionals, business owners, landlords and investors. The requirement depends on your estimated tax liability, not your employment status.
What is Advance Tax?
Advance tax is income tax paid during the same year in which you earn the income. Instead of waiting until the end of the financial year and paying the entire tax amount together, you pay it in instalments during the year.
For example, income earned between April and March belongs to that financial or tax year. If advance tax applies, you must estimate the tax on that income and make payments by the prescribed dates within the same year. Advance tax payments are later adjusted against your final tax liability when you file your ITR.
Who May Need to Pay Advance Tax?
You generally need to pay advance tax if your estimated tax liability for the year is ₹10,000 or more after adjusting for TDS, TCS and eligible tax credits.
The advance tax requirement can apply to:
The ₹10,000 threshold relates to the estimated tax still payable, not your total income.
For instance, suppose your estimated tax liability is ₹65,000 and ₹58,000 is expected to be deducted as TDS. Your remaining liability is ₹7,000. Since it is below ₹10,000, you would generally not need to pay advance tax. If the expected TDS were only ₹50,000, the remaining liability would be ₹15,000. Advance tax would then generally apply.
Do Salaried Employees Need to Pay Advance Tax?
An employer normally deducts tax from salary through TDS. If salary is your only source of income and the correct amount of tax is deducted, you may not have a separate advance tax liability. Advance tax may still be required if you have other taxable income that your employer has not considered.
This could include:
You may disclose eligible additional income to your employer so that it can be considered while calculating TDS. If this is not done, you should estimate your total tax liability separately.
For example, suppose your employer deducts the correct tax from your salary, but you also earn substantial fixed-deposit interest. If the additional tax payable after adjusting the salary TDS is ₹10,000 or more, you may need to pay advance tax.
Who is Exempt From Paying Advance Tax?
You generally do not need to pay advance tax if your estimated tax liability after TDS, TCS and eligible credits is below ₹10,000.
There is also an exemption for certain senior citizens. A resident individual who is aged 60 or above during the relevant year is not required to pay advance tax if they do not have income from a business or profession.
A senior citizen earning income only from sources such as a pension, interest, rent or investments may therefore qualify for this exemption. A senior citizen with business or professional income may still have to pay advance tax if the tax liability reaches the threshold.
How Is Advance Tax Calculated?
Advance tax is based on an estimate of your total income and tax liability for the year.
Tax on estimated total income + surcharge and cess − TDS and TCS − eligible tax relief and credits = Advance tax payable
You can calculate advance tax using the following steps:
- Estimate your income from all taxable sources for the year
- Subtract eligible exemptions and deductions
- Calculate the tax using the applicable tax regime and rates
- Add surcharge and cess, where applicable
- Apply any eligible rebate or tax relief
- Subtract the TDS and TCS expected during the year
- Check whether the remaining amount is ₹10,000 or more
Example
Suppose your estimated tax liability for the year is ₹90,000. Your employer is expected to deduct ₹70,000 as TDS, and another ₹2,000 has been deducted from interest income.
The calculation would be: ₹90,000 − ₹70,000 − ₹2,000 = ₹18,000.
Since the remaining estimated liability is ₹18,000, you would generally need to pay advance tax. Your estimate does not have to remain unchanged throughout the year. If your income increases or decreases, you can revise the calculation before the next instalment and adjust the remaining payments.
Disclaimer: The above calculation is for illustration purpose only. Ujjivan doesn't take any responsibility on the accuracy of the calculation provided herein. Tax rules may change as per applicable laws.
What are the Advance Tax Due Dates?
Most taxpayers must pay advance tax in four instalments:
| Due date | Cumulative advance tax payable |
|---|---|
| On or before 15 June | At least 15% |
| On or before 15 September | At least 45% |
| On or before 15 December | At least 75% |
| On or before 15 March | 100% |
These percentages are cumulative. You do not pay 15%, 45%, 75% and 100% separately. Each percentage refers to the total amount that should have been paid by that date.
For example, if your total advance tax liability is ₹40,000:
Eligible taxpayers (such as small businesses and professionals) opting for the Presumptive Taxation Scheme under Section 44AD or Section 44ADA may pay their entire advance tax liability in a single instalment on or before 15 March.
What if You Receive Unexpected Income?
Some income cannot be estimated accurately at the beginning of the year. Capital gains are a common example because you may not know when an investment or property will be sold. If you receive unexpected taxable income during the year, recalculate your total tax liability and pay the related advance tax in the remaining instalments.
Paying the tax promptly can help limit the interest charged on a shortfall. Keep records of the date on which the income arose, especially for capital gains, dividends and other irregular income.
How Do You Pay Advance Tax Online?
Advance tax can be paid through the Income Tax e-filing portal. The general process is:
- Visit the official Income Tax e-filing portal
- Open the e-Pay Tax service
- Enter or verify your PAN and other required details
- Select the relevant tax payment option
- Choose Advance Tax as the type of payment
- Select the correct Assessment Year (AY) — remember that the AY is always one year ahead of the current Financial Year (e.g., for FY 2025-26, the AY is 2026-27)
- Enter the tax amount
- Choose an available payment method and complete the transaction
- Download and save the payment challan
Check your PAN, tax period, payment type and amount before confirming the payment. Selecting the wrong period can delay or complicate the tax credit. After payment, retain the challan identification details. The payment should also appear in your tax records, though the update may not always be immediate.
What Happens If You Pay Late or Pay Less?
Interest may be charged if you:
The applicable interest is generally calculated at 1% per month or part of a month, depending on the type and period of the default. This interest is levied under Section 234B (for failure to pay 90% of the assessed tax before the end of the financial year) and Section 234C (for deferment or shortfalls in individual quarterly instalments).
A shortfall in one instalment does not mean you should wait until you file your return. You can recalculate the liability and pay the remaining amount in a later instalment. Interest may still apply to the earlier shortfall, but paying promptly can prevent the unpaid amount from continuing to increase.
What If You Pay More Advance Tax Than Required?
If the advance tax and TDS credited to you exceed your final tax liability, the excess amount can be claimed as a refund through your ITR.
The refund is processed after the return is filed and verified, subject to the Income Tax Department's assessment of the information provided. Before filing, check whether all advance tax payments appear correctly in your tax records. If a payment is missing or recorded against an incorrect tax period, it may need to be corrected.
Advance Tax vs Self-Assessment Tax
Advance tax and self-assessment tax are both used to pay income tax, but they are paid at different stages.
| Advance tax | Self-assessment tax |
|---|---|
| Paid during the year in which income is earned | Paid after the year ends |
| Based on estimated income and tax liability | Based on the final tax calculation |
| Paid according to prescribed instalment dates | Paid before filing the ITR |
| Reduces the unpaid liability at year-end | Clears the balance after TDS and advance tax |
Paying advance tax does not remove the requirement to file an ITR. Your final income, deductions, TDS, advance tax and other credits must still be reported in the return.
Final Thoughts
Advance tax allows you to pay your income tax during the year in which the income is earned. It generally becomes payable when your estimated tax liability is ₹10,000 or more after adjusting for TDS, TCS and eligible tax credits.
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