Advance Tax: Who Should Pay & How to Calculate (FY 2026-27)

What is Advance Tax?

Advance tax is the income tax paid in installments during the financial year itself, instead of paying the entire amount at the time of filing. It is essentially a "pay-as-you-earn" system mandated by the Income Tax Department for taxpayers whose total tax liability exceeds a specified threshold.

Who Should Pay Advance Tax?

If your total tax liability for the financial year (after deducting TDS) is ₹10,000 or more, you are required to pay advance tax. This applies to:

• Salaried individuals with significant income from other sources (interest, capital gains, rental income)
• Freelancers and professionals whose income is not subject to TDS
• Business owners with estimated tax liability above ₹10,000
• Senior citizens (60+) without business/professional income are exempt from advance tax

Quarterly Due Dates (FY 2026-27)

Advance tax must be paid in four installments during the financial year:

Installment	Due Date	Cumulative % of Tax
1st Installment	15th June 2026	15%
2nd Installment	15th September 2026	45%
3rd Installment	15th December 2026	75%
4th Installment	15th March 2027	100%

For taxpayers opting for the presumptive taxation scheme under Section 44AD or 44ADA, the entire advance tax can be paid in a single installment by 15th March.

How to Calculate Advance Tax

Follow these steps to calculate your advance tax liability:

1. Estimate your total annual income — include salary, business income, capital gains, rental income, interest, and other sources
2. Compute total tax on the estimated income using applicable slab rates (new or old regime)
3. Add surcharge and cess (4% Health & Education Cess)
4. Subtract TDS already deducted or expected to be deducted during the year
5. If the remaining tax exceeds ₹10,000, pay as per the installment schedule above

Interest on Late Payment — Sections 234B & 234C

Failing to pay advance tax on time attracts interest penalties:

Section 234B — Default in Payment

If you pay less than 90% of your total tax liability as advance tax, interest under Section 234B is charged at 1% per month (simple interest) on the shortfall amount. This interest is calculated from April 1st of the assessment year until the date of actual payment.

Section 234C — Deferment of Installments

If you miss or underpay any quarterly installment, interest under Section 234C is charged at 1% per month for 3 months on the shortfall for that quarter.

Section	Trigger	Interest Rate	Duration
234B	Total advance tax paid < 90% of liability	1% per month	From April 1 until payment
234C	Shortfall in any quarterly installment	1% per month	3 months per shortfall

Example Calculation

Suppose your estimated total income for FY 2026-27 is ₹15,00,000 and your computed tax (after cess) is ₹1,50,000. Your employer deducts ₹80,000 as TDS. Remaining tax: ₹70,000.

Since ₹70,000 exceeds ₹10,000, advance tax applies:

Installment	Due Date	Amount to Pay
1st (15%)	15 June 2026	₹10,500
2nd (cumulative 45%)	15 Sep 2026	₹21,000
3rd (cumulative 75%)	15 Dec 2026	₹21,000
4th (cumulative 100%)	15 Mar 2027	₹17,500

How to Pay Advance Tax

• Pay online via the Income Tax e-Filing portal (incometax.gov.in) using Challan 280
• Select Tax Applicable: (0021) Income Tax (other than companies)
• Select Type of Payment: (100) Advance Tax
• Choose assessment year 2027-28 for FY 2026-27 payments
• Pay via net banking, debit card, or UPI

Frequently Asked Questions

Is advance tax applicable for salaried employees?

If your employer deducts TDS on your entire income, and your remaining tax liability is below ₹10,000, you don't need to pay advance tax. However, if you have additional income (capital gains, rental income, freelancing) that pushes your net tax liability above ₹10,000, advance tax applies.

What happens if I don't pay advance tax?

You will be liable to pay interest under Section 234B and/or 234C. While there is no penalty for non-payment, the interest charges can add up significantly — 1% per month on the shortfall amount.

Can I pay advance tax after the due date?

Yes, you can pay at any time. However, interest under Section 234B/234C will be calculated on the shortfall for the period of delay.

Are senior citizens exempt from advance tax?

Senior citizens (aged 60+) who do not have income from business or profession are exempt from paying advance tax. They can pay their entire tax liability as self-assessment tax at the time of filing.