Advance tax is the system of paying income tax during the tax year instead of waiting until the end of the year. Under the Income Tax Act, 2025, taxpayers whose estimated tax liability after adjusting TDS is ₹10,000 or more shall pay advance tax in instalments.
The new act came into force on 1 April 2026, and applies to income earned and tax payments made for Tax Year 2026–27 and onwards.
Here are the key rules taxpayers should know.
Who is required to pay advance tax?
Any taxpayer, including an individual, firm, or company, whose estimated tax liability for the tax year is ₹10,000 or more after adjusting TDS is required to pay advance tax.
However, individuals earning only salary income do not need to pay advance tax because their employer deducts TDS.
Who is exempt from paying advance tax?
A resident senior citizen aged 60 years or above is not required to pay advance tax if they do not have income from business or profession.
What are the advance tax payment deadlines?
For taxpayers other than those covered under the specified presumptive taxation scheme, advance tax is payable in instalments:
By 15 June: 15% of total advance tax
By 15 September: 45%
By 15 December 15: 75%
By 15 March: 100%
Taxpayers opting for the presumptive taxation scheme have to pay 100% of their advance tax by 15 March.
How is advance tax calculated?
A taxpayer should first estimate total income for the year, including salary, house property, business or professional income, capital gains, and other sources.
The broad calculation is:
Add total income from all sources.
Subtract eligible deductions and applicable rebate.
Calculate income tax based on the selected regime.
Add surcharge, if applicable, and 4% health and education cess.
Subtract eligible tax reliefs.
Subtract TDS, TCS, and advance tax already paid, along with eligible MAT/AMT credit.
The remaining amount is the advance tax liability.
What if income changes during the year?
Taxpayers can revise their income estimate during the year. If income increases after the first or second instalment, they can adjust the remaining instalments and pay advance tax according to the revised estimate.
There is generally no requirement to separately submit the revised income estimate to the tax department merely because the estimate has changed.
How are capital gains treated for advance tax?
Capital gains are also included while calculating advance tax. However, it may not always be possible to know about such gains in advance.
If capital gains arise after an instalment’s due date, the tax on those gains can be paid through the remaining instalments.
Can advance tax be paid from someone else’s bank account?
Yes. Advance tax can be paid from another person’s bank account. However, the challan must clearly mention the PAN of the taxpayer on whose behalf the payment is being made.
When does advance tax appear in Form 26AS?
Advance tax paid is generally reflected in Form 26AS after the bank uploads the payment details. The tax department’s guidance states that this can take around 3-4 working days after payment.
What details should be checked while making the payment?
Before confirming the payment, taxpayers should check:
PAN
Tax year
Correct tax-payment head
Type of payment, such as advance tax
Tax amount, including applicable surcharge and cess
Is advance tax an expense?
No. Advance tax is not treated as a business expense. It is treated as a tax payment or asset and is adjusted against the taxpayer’s final tax liability.
In a bold move to streamline tax compliance and enhance transparency, the Institute of Chartered Accountants of India (ICAI) has made a significant recommendation in its Pre-Budget Memorandum for the fiscal year 2026-27. Among various proposals aimed at reducing litigation for taxpayers, one of the most notable is the suggestion to rename “advance tax” as “estimated tax.”
Why Rename Advance Tax?
The memorandum states, “Advance tax to be referred to as ‘estimated tax’. Consequently, with the shift from the terms ‘assessment year’ and ‘previous year’ to a unified ‘tax year,’ the term ‘advance tax’ may be updated to ‘estimated tax.’” This change reflects a necessary evolution in the tax landscape, where taxpayers will now make payments based on income estimates within the same year. It is a more precise term that aligns seamlessly with the new system.
ICAI has emphasized that this change is purely terminological, and it will not impact the payment timelines or tax liabilities of individuals. The goal is to improve clarity and reduce ambiguity in tax language, making it more understandable for taxpayers.
Additional Recommendations from ICAI
In addition to renaming advance tax, the ICAI has proposed other noteworthy recommendations:
Optional Joint Taxation Scheme for Couples: This would allow married couples to claim the standard deduction separately on their respective salary incomes, thus potentially reducing their overall tax burden.
Exclusion of F&O Trading: Futures and Options trading will no longer fall under presumptive taxation, providing clearer guidelines for traders.
Mandatory Audits for Profit-Linked Deductions: This ensures stringent compliance for those claiming profit-linked deductions.
Introduction of Year-Weight e-Ledger: This tool will help taxpayers track TDS, TCS, and estimated tax payments efficiently.
Simplified Return Processing: Scrutiny will be limited to arithmetical errors or evident incorrect claims, enhancing the experience for taxpayers.
Clarifications on Surcharge Rates: A need for clarity on surcharge rates for high-income earners has also been addressed, alongside proposed decriminalisation of certain penalties.
Looking Ahead
As the finance community eagerly anticipates these changes, all eyes are on Finance Minister Nirmala Sitharaman, who will unveil the ninth consecutive budget on February 1, 2025 (Sunday). This presentation will bring her closer to matching the record of ten budgets set by former Prime Minister Morarji Desai.
With these recommendations, ICAI aims to foster a more taxpayer-friendly environment while addressing the complexities of the current tax system. It’s an exciting time for taxpayers in India, and the shifts in terminology and policy could pave the way for a smoother tax experience moving forward.
Attention all taxpayers! Today is the last day to pay your 2nd Installment of Advance Tax for FY 2024-25. Ensure your payment is made to avoid penalties.
Days left to pay the upcoming advance tax installments for FY 2024-25:
After some taxpayers received inflated advance tax payment notices, the Income Tax Department said it identified “certain inconsistencies” in the financial transaction data reported in the annual information statement (AIS).
Taking to X (formerly known as Twitter), the IT department said, “Based on feedback from taxpayers on the e-campaign for Advance Tax, the Department has identified certain inconsistencies in the data of the securities market (SFT-17) provided by one of the reporting entities. The reporting entity has been asked to submit a revised statement based on updated information.”
On March 10, the department launched an e-campaign to inform taxpayers whose tax payments in the financial year 2023-24 did not match financial transactions as reported in AIS.
The Income Tax Department receives information of specified financial transactions of taxpayers from various sources. To increase transparency and to promote voluntary tax compliance, this information is reflected in the Annual Information Statement (AIS) module and is available to persons/entities for viewing. The value of ‘significant transactions’ in the AIS has been used for carrying out this analysis,” the IT department said in a statement.
The Income Tax Portal has been updated with a new development. When selecting Assessment Year (AY) 2024-25, the system will automatically display “Advance Tax (100)” as the first option. Similarly, when choosing AY 2023-24, the system will show “Self-Assessment Tax (300)” as the first option. This enhancement aims to save time for taxpayers and reduce the likelihood of errors. Two images related to this update are also provided.
If you are anticipating a tax liability of Rs 10,000 or more in a year, get ready to pay advance tax. Failure to do so will attract 1 percent penal interest per month. But if you miss the March 15 deadline, you can still pay your advance tax by March 31, albeit with one month’s interest. So, don’t wait until July 31 to do this.
Advance tax is the amount of income tax that should be paid much in advance instead of lump-sum payment at the year-end in instalments as per the due dates given by income tax department. Advance tax is also known as ‘pay as you earn’ tax and is supposed to be paid in the same year the income is received.
Who Needs to Pay Advance Tax?
As per section 208 of Income Tax Act, a taxpayer needs to pay advance tax if their tax liability is 10,000 or more in a financial year. For instance, if your tax liability for the FY 2019-2020 exceeds 10,000, then you are required to pay advance tax in the same year.
Advance tax is for those who earn money from sources other than salary. It is applicable for self-employed individuals, professionals, and business men if their income exceeds a certain limit This includes money that comes from shares, interest earned on fixed deposits, rent or income received from house tenants. Senior citizens who are more than 60 years of age are exempt to advance tax.
1. Make an estimate of the total income earned by you other than your salary. 2. Subtract all expenses from your income, including medical insurance premiums, phone costs, travel expenses, etc. 3. Now, add other income that you received apart from your salary. This includes interest from FDs, house rent, lottery earnings, etc. 4. If the amount of tax calculated is more than 10,000, then you are liable to pay advance tax.
Example of Advance Tax Calculation
Naveen is a salaried professional. For the FY 2020-21, Naveen estimated that his annual gross receipts would be Rs 40,00,000, his expenses would be Rs 24,00,000. Naveen deposited Rs 80,000 in his PPF account for his post-retirement expenses. He also paid Rs 50,000 towards his life insurance premium. Further, he paid Rs 24,000 towards his health insurance. The professional receipts of Naveen are subject to TDS. He estimated a TDS of Rs 60,000 on certain professional receipts for the FY 2020-21. Besides, he estimated an interest of Rs 10,000 on fixed deposits held by him. Here is how advance tax on Naveen’s salary will be calculated:
1. To pay advance tax online, you need to click on the government’s official website – http://www.tin-nsdl.com 2. Choose the correct challan that is ITNS 280, ITNS 281, ITNS 282 or ITNS 284 as relevant to pay your advance tax. 3. Fill in your PAN card details along with other important information such as your address, phone number, e-mail address, bank name, etc. 4. Once you have entered all the details, you will be redirected to the net-banking page of the website. 5. Now, you will receive all the information regarding your payment. Enter all payment details and pay your advance tax online successfully.
What are the Benefits of Advance Tax?
Here’s a list of benefits you get when you pay tax in advance –
If your tax liability is Rs.10,000 and above, you are eligible to pay advance tax. Further, you should be a salaried professional or self-employed individual. If you are earning through rentals from house or property, you should pay advance tax. Also, if you earn interest from any Fixed Deposits on your name, you are eligible for advance tax payment.
2. What happens if I pay advance tax less/more than necessary for a financial year?
If the taxpayer has deposited less than 90% of the total tax liability, interest will be levied under Section 234B. The individual has to pay interest at the rate of 1% per month. Whereas if you pay a higher advance tax or advance tax more than necessary, you will receive the excess amount as a refund. Income Tax department will pay interest at the rate of 6% per annum to the taxpayer on the excess amount if the amount is more than 10% of the tax liability.
3. What is the penalty if I miss the due dates of paying Advance Tax?
Failing to pay advance tax by due dates result in penalty. Penalty will be levied on the unpaid amount of advance tax at 1% simple interest per month of part of the month under Section 234B. If the taxpayer doesn’t make the full payment, interest is levied on the shortfall amount. And in case of shortfall for payment, interest will be levied for a period of 3 months under Section 234C.
4. Can I claim deduction under Section 80C while estimating income for calculating my advance tax?
Yes. Deduction can be claimed under Section 80C while estimating income for calculating advance tax.
5. Is an NRI Liable to pay advance income tax?
If you are an NRI and you receive your salary in an Indian bank account, your salary is subjected to Indian Tax Laws. The last date to file income tax return in India for NRIs is July 31st. And being an NRI, if your tax liability exceeds Rs.10,000 in a financial year, you are required to pay advance tax.
Identifying Taxpayer Discrepancies: Examining “Zero” and “Lower” Advance Tax Payments: Between April and August of this year, the Income Tax Department dispatched notifications to approximately 500,000 taxpayers regarding “zero” and “lower advance tax payments”, as revealed by an official familiar with the situation to Business Standard. These notifications were generated following an examination of “significant transaction” data from the preceding fiscal year and the initial quarter of the current fiscal year.
The department’s analysis highlighted approximately 2.5 million instances in which taxpayers with substantial incomes and significant high-value purchases made little to no advance tax payments during FY23. In numerous instances, the advance tax payments in the first quarter (April-June) of the current fiscal year revealed that taxpayers paid lower taxes in comparison to their substantial expenditures, indicating a discrepancy.
This initiative is being undertaken in anticipation of the second installment of advance tax payments, which is due on September 15. Sources have noted a significant rise in taxpayers evading advance tax payments over the past three to four years, and such actions aim to discourage non-compliance among assesses. Advance tax payments are divided into four installments between June, September, December, and March. These payments are calculated based on taxpayers’ estimations of their expected income and serve as an indicator of potential tax collection in the upcoming months.
Usually, taxpayers make payments amounting to 15 per cent of their tax liability in June, followed by 45 per cent in September, 75 per cent in December, and the remaining balance in March.
Considering that gross tax revenue from April to July only increased by a modest 2.8 per cent year-on-year, and net revenue actually decreased by nearly 13 per cent, the government is actively addressing inefficiencies in the realm of direct taxes.
Upon scrutinizing pertinent data pertaining to “high-value” purchases, the revenue department may have the ability to estimate potential taxable income based on PAN-linked transactions. In cases where the revenue department identifies that a taxpayer has significantly underpaid their initial installment of advance tax (due on June 15), they may issue notifications to prompt these individuals to make timely and accurate advance tax payments.
Some of the individuals who received these notifications include taxpayers with substantial earnings in sectors like pharmaceuticals, healthcare, and chemicals during FY23, despite projecting comparatively lower income and making lesser payments in the initial installment.
Notifications are also being sent to taxpayers who achieved substantial gains in the stock market in the previous year and acquired high-value real estate and vehicles, revealing a potential disparity between their income and investments.
This divergence could be attributed to various factors, such as a weakening rupee, inflation, elevated interest expenses, and overall high costs leading to lower-than-anticipated income for the fiscal year.
The Department’s authorities are actively seeking information through various channels, including internal data processing (specific financial transactions/annual information statements/tax information statements) based on PAN, with the goal of ensuring that taxpayers accurately report their income in their tax filings.
A “significant transaction” typically refers to a transaction involving the purchase of goods worth lakhs of rupees, a stated turnover of 10 crores, transactions related to immovable properties, withdrawals of cash exceeding ₹20 lakhs from banks or post offices, credit card payments exceeding ₹10 lakhs, and similar substantial financial activities.
March 15 is last date for payment of the last instalment of Advance Tax for the financial year 2022-2023. . The Income Tax Department has also recently appealed to taxpayers to pay their last instalment of advance tax by the due date.
Attention Taxpayers! The last date for payment of the last instalment of Advance Tax is almost here!
Do remember to pay your fourth & final instalment of Advance Tax by 15th March, 2023. pic.twitter.com/nDvehTrpSV
Advance tax is the amount of income tax that should be paid in installments as per the income tax department’s due dates rather than in one lump sum at the end of the fiscal year. The first installment i.e. 15 percent of the total amount should be paid by 15th June. The payment of second Installment or 45 percent of the tax should be made by 15th of September. The third installment of the 75 percent of the advance tax should be cleared by 15th December. The remaining amount or 100 percent of the tax should be paid on or before 15th March.
According to the tax department’s official website, every individual whose estimated tax liability for the year is ₹10,000 or more shall, as per section 208, pay his tax in advance in the form of advance tax. The income tax is calculated as per the provisions of the Income Tax Act, 1961 (Act)
However, the rule does not apply to senior citizens who are not supposed to pay any advance tax unless they have an income from a business or profession.
Penalty if you fail to pay Advance tax
When a taxpayer fails to pay their income tax prior to the due date, they would be liable to pay interest on the unpaid tax under sections 234B and 243C.
If an individual fails to pay the advance tax liability or misses any of the installments on or before the specified due dates or there is a shortfall in payment, the due amount will attract interest of 3% per quarter for the first 3 quarters and 1% for the final quarter. An individual will also be liable to pay additional interest from April (after the end of financial year) at the rate of 1% per month on the shortfall of advance tax, in case the advance tax paid by such an individual is less than 90% of the total tax payable.
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Here are seven financial tasks that you should complete before March 31, 2023.
1) Link PAN with Aadhar: The last date to link Permanent Account Number (PAN) and Aadhaar cards is March 31, 2023. If you miss the deadline your PAN will become inoperative. In a recent advisory, the government of India clarified that it is mandatory. From April 1, 2023, the unlinked PAN shall become inoperative.
“First and foremost is linking the PAN with Aadhaar otherwise, the PAN will be inoperative, and the taxpayer may not be able to perform several financial transactions that require PAN. There is a penalty of Rs 10,000 in case of a person who is required to quote his/her permanent account number or Aadhaar number, quotes a false or an invalid PAN,” says Yeeshu Sehgal, Head of Tax Market, AKM Global, a tax and consulting firm.
2) Payment of Advance Tax: Every taxpayer who has a tax liability exceeding Rs 10,000 has to pay advance tax. It is paid in four instalments where 15 per cent is paid by June 15, 45 per cent by September 25, 75 per cent by December 15, and 100 per cent by March 15, of the financial year. However, if you have an additional income like capital gains or you have changed your job then you might need to calculate and pay advance tax.
In case you have not yet paid the entire advance tax liability for 2022-2023 by March 15, then you have the chance to pay it by March 31, 2023. Post March, 1 per cent interest per month has to be paid on the due amount till the payment or filing of ITR.
3) Tax saving Investments: If you have not done tax savings for FY 2022-23 then you have time till March 31st, 2023 to complete the task. Investments done after the close of FY23 will not be available for claiming deductions under the old tax regime while filing the Income Tax Return or ITR for FY 23.
Under section 80C of the Income Tax Act, you are enabled to claim for the tax deduction with the highest limit of Rs 1.5 lakh, provided you have chosen the old tax regime. Some of the tax-saving ways for investment in 2023 include Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Pension System (NPS), Sukanya Samriddhi Yojana (SSY) and Fixed Deposits (FDs) of 5 years or more.
4) Updated ITR Filing: It is necessary to submit the updated income-tax return for FY 2019-2020 or AY 2020-21 by 31st March 2023, as it cannot be filed by taxpayers after the deadline has passed.
“If any person wants to file the updated return, 31st March 2023 is the last date to file such return for FY 2019-20 with the additional tax to be paid as 50 per cent of the aggregate of tax and interest. It is pertinent to note that the updated return cannot be filed in case of refunds and in case of any tax proceeding for assessment or reassessment under the income-tax act is pending or has been completed for the relevant assessment year,” says Sehgal.
5) Fill out Form 12B: If you have changed jobs then do remember to fill out form 12B so that the salary from your previous employer can be included for tax calculation purposes. “In case of taxpayers who are salaried and they have changed jobs during the year, they must provide details in form 12B (details of the salary from the previous employer) to the new employer based on which the new employer will be able to deduct the exact TDS on the salary income,” says Sehgal.
6) Capital Gain: Earlier the long-term tax on equities was tax-free but with effect from Budget 2018, the long-term capital gain on equity fund is tax-free only up to Rs 1 lakh. For the amount in excess of Rs 1 lakh the tax rate is 10 per cent without the benefit of indexation. Hence, if there is a need to redeem investments in the near future, you can consider redeeming before March 31 to avail the benefit of the tax-free limit of Rs 1 lakh for FY 23. Short-term capital gains are taxable at 15 per cent.
If you redeem equity after one year from the date of allotment then the investment is defined as long-term. Similarly, capital gain from the redemption of equities within one year is known as short-term capital gains.
7) Pradhan Mantri Vaya Vandana Yojana (PMVVY)
For senior citizens, there are various options such as Pradhan Mantri Vaya Vandana Yojana (PMVVY), for building a retirement fund. Applications for Pradhan Mantri Vaya Vandana Yojana are being accepted till 31 March 2023. PMVVY pays out a pension at the assured rate of 7.4 per cent. The scheme is designed specifically for senior citizens who are above 60 years, and is for a fixed period of 10 years. One can invest up to Rs 15 lakh in the policy for a monthly pension of Rs 9,250. On the minimum investment of Rs 1.62 lakh, the monthly pension works out to Rs 1,000.
As you commence planning your investments for the upcoming fiscal year, do complete the above-mentioned tasks for smooth sailing in FY23.
As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of “advance tax”. However, section 207 gives relief from payment of advance tax to a resident senior citizen. As per section 207 a resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession, is not liable to pay advance tax.
Following are not required to pay Advance Tax:
(1.) A resident senior citizen (i.e., an individual of the age of 60 years or above during the financial year) not having any income from business or profession is not liable to pay advance tax.
(2.) Taxpayer who opted for presumptive taxation scheme of section 44AD or section 44ADA is liable to pay 100% of advance tax by 15th March.
Advance tax collection has increased by 41 percent in the current financial year in the country. With this, the tax collection from personal and corporate income has increased by more than 48 percent in the current financial year. This explains the continuous economic recovery in the economy affected by the corona virus epidemic. According to the official statement, the net direct tax collection in the current financial year till March 16, 2022 stood at Rs 13.63 lakh crore. It was Rs 9.18 lakh crore in the corresponding period of 2020-21 a year ago.
The net direct tax collection in the current financial year is 35 per cent higher as compared to the pre-pandemic 2019-20 at Rs 9.56 lakh crore. This category includes tax on personal income, tax on profits to companies, wealth tax and inheritance tax, and gift tax. Advance tax collection increased by 40.75 per cent to Rs 6.62 lakh crore. The last date for depositing its fourth installment was March 15.
1. Advance Tax Due Dates for Individuals and Corporate Taxpayers
Due Date of Instalment
Amount of Advance Tax Payable
On or before 15th June
15% of Advance Tax
On or before 15th September
45% of Advance Tax minus the previous instalment
On or before 15th December
75% of Advance Tax minus the previous instalments
On or before 15th March
100% of Advance Tax minus the previous instalments
How is advance tax calculated?
Here is how the advance tax to be paid is arrived at:
Income tax on estimated total income
– Relief under section 87A
= Income tax after relief u/s 87A
+ Surcharge on the estimated income
= Tax Liability
+ Education cess
+ SHEC
= Total Tax Liability
– Relief other than relief u/s 87A
– TDS
= Advance Tax Liability
How to Pay Advance Tax Online?
A number of bank branches have been authorised by the Income Tax Department for receiving Advance Tax payment on behalf of the government. You can visit any of the bank branches and make the required payment. Alternatively, you can make online payment by visiting the official website of the income tax department.
Visit the e-payment facility on the website of Income Tax Department.
Choose the right form for the payment of Advance Tax. For individuals it is ITNS 280.
Select the correct code for Advance Tax. The code number applicable is 100.
Fill out your PAN, name, address, email address, number etc
Once you click on proceed, you will be redirected to the net banking page or debit card payment gateway, whichever you have opted for.
Make the payment.
After making the payment, you will get the receipt called challan 280 on the next screen. Save a copy of it as you will need it at the time of filing ITR.
Steps for payment of Advance Tax Offline
Visit the bank branch and ask for the applicable tax payment challan form-Challan 280 (in this case).
Fill in the details as required in the form. The details asked in the form are the same as required in the online form.
Go to the relevant bank’s counter and submit the filled-in Challan 280 form along with the money. The tax payment can be made either in cash or cheque.
Once you give the money and challan and the bank official will give you a receipt by tearing off a portion of the challan, filling in details of payment, and stamping it.
Education is the bedrock of growth of our nation. Your taxes make education accessible for all! Do remember to pay your second installment of Advance Tax by 15th September, 2021.
Today we will discuss on basics of Advance tax concept under direct tax.
Advance tax means income tax should be paid in advance instead of lump sum payment at year end. It is also known as pay as you earn tax. These payments have to be made in instalments as per due dates provided by the income tax department.
Payment of tax liability by a person before the end of the financial year is called advance tax
3 cases normally Exempt from provision of Advance tax.
Resident senior citizens (age 60 years or more) not having income from PGBP.
Assessees whose advance tax liability is less than INR 10,000 for the relevant previous year.
Assessees whose entire amount of tax payable has been deducted through TDS.
Normally, employees are not required to pay advance tax since the employer deducts the amount of TDS of employees every month and deposit the same with government. However, in case employee is earning other sources of incomes which have not been disclosed to the employer for TDS purpose, in such case employee shall calculate the liability of advance tax and pay such tax accordingly.
Dates and Installments of Advance tax:
Other than Section 44AD or Section 44ADA assessee:
The assessee is required to pay the advance tax in four installments
Installment No. 1: 15% of total tax payable : 15th June
Installment No. 2: 45% of total tax payable : 15th September
Installment No. 3: 75% of total tax payable 15th December.
Installment No. 4: 100% of total tax payable: 15th March
Note:
1) Installments are cumulative and amount already paid till installment date is required to be deducted from computed amount as per percentage.
2)The law provides the accumulated %age due to restating the estimations of advance tax so that most recent estimation shall be applicable).
Section 44AD and Section 44ADA assessee:
100% of the advance tax on 15th March in one installment only.
Note:
The Installments are applicable for all type of assessees.
Section 44AD (8% or 6%) is applicable to individual, HUF and a firm other than LLP who are RESIDENT of India only doing business.
Section 44ADA (50%) is a presumptive taxation scheme for professionals which have been introduced by Finance Act, 2016
