Advance tax
What Advance tax means, how it works, a worked example, the mistakes we see and the questions founders ask.
DefinitionAdvance tax is income tax paid in four instalments during the year, due on 15 June, 15 September, 15 December and 15 March, by anyone whose tax after TDS exceeds ₹10,000.
The government wants tax as you earn, not once a year. If your estimated tax for the year, after TDS credit, is more than ₹10,000, you pay 15% of it by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. Companies, LLPs, firms, freelancers and salaried people with side income all fall under this rule; salaried people whose employer deducts full TDS usually do not. Presumptive taxpayers under 44AD and 44ADA can pay the whole amount by 15 March. Pay late or short and interest runs at 1% a month under Sections 234B and 234C. The practical fix is a quarterly estimate of profit, which also tells you whether the year is on track.
How Advance tax works
Advance tax applies to every taxpayer, individual or company, whose tax for the year after TDS and TCS credit is ₹10,000 or more. The schedule is cumulative: at least 15% of the year's tax by 15 June, 45% by 15 September, 75% by 15 December and the full amount by 15 March. A resident senior citizen with no business income is exempt, and anyone on presumptive taxation under Sections 44AD or 44ADA pays the whole amount in one instalment by 15 March.
Each instalment is paid as a challan on the income tax portal (e-Pay Tax, challan ITNS 280, code 100 for advance tax) against the PAN, and the payment appears in Form 26AS within a day or two. There is no form to file with it; the figures simply flow into the return. Any balance left after 15 March is paid as self-assessment tax (code 300) before filing, with interest.
Interest under Section 234C runs at 1% a month for three months on each instalment that falls short (one month for the March instalment), and Section 234B adds 1% a month from 1 April until the tax is paid if less than 90% of the year's tax was paid by 31 March. Capital gains and dividends that arrive unexpectedly are forgiven for the instalments before they arose, provided the tax on them is paid in the next instalment.
A Pune consultancy company expects a profit of ₹30 lakh for 2026-27 and tax of about ₹6.3 lakh after clients' TDS of ₹1.5 lakh. It pays ₹95,000 by 15 June, a further ₹1.9 lakh by 15 September, ₹1.9 lakh by 15 December and the last ₹1.6 lakh by 15 March. When a large project lands in January, it recalculates and tops up the March instalment, so the only interest it owes is 234C for the lower December payment.
Mistakes we see with Advance tax
- Treating TDS as the whole tax, so a founder drawing salary plus consulting fees underpays and meets a 234B and 234C bill with the return.
- Paying the year's advance tax under the wrong assessment year or the wrong code on the challan, which parks the money against a year the return does not claim.
- Skipping the June and September instalments on the view that profit is unknowable yet, when the law expects a reasonable estimate and charges interest on the shortfall.
- Forgetting that a company pays advance tax on its own profit even in its first year, with no ₹10,000 relief for small amounts once the threshold is crossed.
Last updated 19 October 2026. Checked against the MCA, GST, Income-tax and Trade Marks rules in force for October 2026.
Where you will meet this term
- Income Tax Planning & FilingSalaried people, investors, NRIs, freelancers and business owners who want the return right, not just filed.from ₹999
- Accounting & MISFounders who want the books closed every month and a one-page MIS they can actually read, with GST and TDS data ready on time.from ₹4,999/month
Questions founders ask about Advance tax
Does a salaried person need to pay advance tax?
Not usually, because the employer's TDS covers the salary. It becomes due when other income, such as interest, capital gains, rent or freelance fees, leaves tax of ₹10,000 or more after TDS. Declaring that other income to the employer so TDS covers it is the simpler route.
What happens if I miss an advance tax instalment?
Nothing happens at once; the shortfall is picked up when you file the return. Interest under Section 234C runs at 1% a month for the quarter on the shortfall, and 234B adds 1% a month from April if less than 90% was paid by 31 March. There is no penalty beyond the interest.
How do I estimate advance tax when income is uncertain?
Take the profit to date, project it for the year, apply the rate for your entity and subtract expected TDS. Revise at each instalment; the law charges interest only on the shortfall against the final figure, so a good-faith estimate updated quarterly keeps the cost small.