You must pay advance tax if your estimated tax for the year is ₹10,000 or more. The Income Tax Department states that threshold under Section 404 of the Income Tax Act, 2025, and says it is unchanged from the old Act. Four instalments fall due, on 15 June, 15 September, 15 December and 15 March. Miss them and interest runs at 1% a month.
One thing has changed, and almost no other page has caught up. The section numbers are new. The interest you knew as 234B is now Section 424. The interest you knew as 234C is now Section 425. The rules are the same; the citations are not.
Who has to pay advance tax?
Anyone whose tax payable for the year, after the credit for tax already deducted at source, works out at ₹10,000 or more. That catches most freelancers, consultants, landlords, traders and business owners. It also catches salaried people with large interest income, rental income or capital gains, because TDS on those is smaller than the tax due.
If your only income is salary and your employer deducts correctly, you will usually have nothing left to pay in advance. Check your Form 26AS and Form 16 against your actual income before you assume that. Interest income is the usual reason the sum stops working.
What are the advance tax due dates and instalment percentages?
| Rule or limit | Figure | Applies to | Statutory source |
|---|---|---|---|
| Threshold to be liable at all | ₹10,000 of tax payable | Every taxpayer | Section 404, Income Tax Act, 2025 |
| First instalment, due 15 June | 15% of the year’s tax | Taxpayers not under the presumptive scheme | Advance tax instalment schedule |
| Second instalment, due 15 September | 45% cumulative | Taxpayers not under the presumptive scheme | Advance tax instalment schedule |
| Third instalment, due 15 December | 75% cumulative | Taxpayers not under the presumptive scheme | Advance tax instalment schedule |
| Fourth instalment, due 15 March | 100% cumulative | Taxpayers not under the presumptive scheme | Advance tax instalment schedule |
| Presumptive taxpayers | 100% in a single instalment by 15 March | Those opting for presumptive taxation under Section 58 | Section 408(2), Income Tax Act, 2025 |
| Interest for failure to pay | 1% per month or part of a month | Anyone who underpaid for the year | Section 424 (old Section 234B) |
| Interest for deferring an instalment | 1% or 3% for the specified period | Anyone who paid late or short in a quarter | Section 425 (old Section 234C) |
Sources: Income Tax Department, tax payments help pages, incometax.gov.in, read on 7 September 2026, for the threshold, the presumptive rule and the interest sections. Instalment percentages from our tax dataset for FY 2026-27, as of 17 August 2026.
How much does it cost to miss an instalment?
Less than most people fear, and more than most people expect.
Take a freelancer with ₹2,00,000 of tax for the year who pays nothing until March. The June instalment should have been ₹30,000 and the September one ₹90,000 cumulative. Each quarterly shortfall attracts interest for the specified period under Section 425. Then Section 424 adds 1% a month on the amount still unpaid after the year ends, running until you actually pay it with your return.
The 424 interest is the one that grows. File in July and that is roughly four extra months of 1%. This is simple interest on the shortfall, not a penalty on your whole tax bill, so a small underpayment stays small. A full-year default does not.
Pay something rather than nothing
Interest is charged on the shortfall. Paying 70% of an instalment costs interest on 30%. Many people skip a quarter entirely because they cannot compute the exact figure. That is the expensive choice. Estimate high, pay, and adjust the next quarter. Any excess comes back as a refund.
What about capital gains you could not have predicted?
The old Section 234C carried a relief for income a taxpayer could not reasonably have foreseen, such as a capital gain or a lottery win, provided the tax on it was paid in the remaining instalments. Section 425 replaces 234C, and we could not open its full text at source. If your shortfall is caused by a one-off gain, read the provisos to Section 425 or ask your tax adviser before you assume the relief still applies. Do not take it from a page that has not read the section, including this one.
What we can say without qualification is the practical rule. Sell an asset in December and the tax on that gain belongs in the December or March instalment. See capital gains tax for how to compute it.
Are senior citizens exempt from advance tax?
Under the old Act, a resident individual aged 60 or over with no income from business or profession was not required to pay advance tax. The Income Tax Act, 2025 has renumbered these provisions, and we could not open the corresponding section. Treat the exemption as likely but unconfirmed here, and check it before you skip an instalment.
How do you actually pay it?
Through the e-Pay Tax service on the income tax portal. Choose the right assessment year and the head “Advance Tax”, which is minor head 100. Getting the head wrong is the most common clerical error and it leaves the payment sitting against the wrong demand. The challan then appears in your Form 26AS and your annual information statement. Run the numbers first on our advance tax calculator.
Frequently asked questions
What happens if I pay all my advance tax in March?
You still owe interest for the earlier quarters you skipped. Section 425 charges for the deferment of each instalment. Paying the full amount by 15 March avoids the larger Section 424 interest, which runs at 1% a month after the year ends. So a March catch-up is much better than nothing, and worse than paying on schedule.
Do salaried employees need to pay advance tax?
Usually not, if the employer’s TDS covers the full liability. You do need to, if you have side income your employer does not know about. Interest from deposits, rent, dividends, capital gains and freelance fees are the common causes. You can also declare that income to your employer so higher TDS is deducted instead.
Is advance tax the same as TDS?
No. TDS is deducted by whoever pays you. Advance tax is paid by you, on the balance TDS does not cover. Both are credits against the same final liability, and both show up in Form 26AS. Your advance tax is computed after subtracting the TDS you expect for the year.
What if I overpay advance tax?
The excess comes back as a refund after you file, and the department pays interest on it. Overpaying is not costly beyond the loss of use of the money. Given the interest on underpayment, rounding up is usually the cheaper mistake. See income tax refunds for how long it takes.
Are the sections still called 234B and 234C?
Not under the Income Tax Act, 2025. The department’s own tax payment guidance now cites Section 424 for failure to pay advance tax and Section 425 for deferment of instalments, with the rates unchanged. Older pages, including many still ranking, use the old numbers. The obligation is identical either way.
Sources
- Income Tax Department, tax payments help section — ₹10,000 threshold under Section 404, presumptive rule under Section 408(2), interest under Sections 424 and 425: incometax.gov.in, read 7 September 2026.
- Instalment percentages of 15%, 45%, 75% and 100%: our tax dataset for FY 2026-27, as of 17 August 2026.
- The senior citizen exemption and the unforeseen-income relief are named but not quoted, because we could not open the corresponding sections of the Income Tax Act, 2025 at source.
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