Most salaried Indians never think about advance tax — their employer deducts TDS every month, which is advance tax by another name. But the moment you earn significant income outside salary — freelance fees, rental income, capital gains, business profits, high bank interest — the pay-as-you-earn obligation falls on you directly. Advance tax is the system of paying your income tax in quarterly instalments during the year itself, and missing it attracts interest penalties that surprise first-time freelancers and investors every March. Here is who pays it, when, and how to calculate it.

Who needs to pay advance tax

The rule is simple: if your total tax liability for the financial year, after subtracting TDS and TCS already deducted, exceeds 10,000 rupees, you must pay advance tax. This catches freelancers and consultants whose clients deduct only 10 per cent TDS while their slab rate is 20 or 30 per cent; landlords whose tenants deduct 2 to 5 per cent against a higher slab liability; investors realising large capital gains; and businesses with profits beyond TDS coverage. Senior citizens without business income are explicitly exempt — a thoughtful carve-out for retirees living on interest and pensions. Salaried individuals whose employer deducts full TDS generally have nothing further to pay, unless they have substantial other income the employer does not know about.

The instalment schedule

Advance tax is paid in four instalments: at least 15 per cent of the estimated annual liability by June 15, 45 per cent cumulatively by September 15, 75 per cent by December 15, and 100 per cent by March 15. Taxpayers under the presumptive taxation scheme get a simplified single instalment — 100 per cent by March 15. Capital gains complicate the schedule because they arrive unpredictably: the law sensibly requires advance tax on capital gains only from the quarter in which the gain arises, so a December share sale does not retroactively penalise your June and September instalments. Mark these dates — the interest clock for shortfalls starts ticking the day after each due date.

How to calculate it

Estimate your total income for the year from all sources, subtract eligible deductions and exemptions, and compute tax at your regime’s slab rates plus cess — the income tax portal’s calculator does this in minutes. From that gross liability, subtract TDS and TCS expected to be deducted during the year. The remainder is your advance tax payable, split across the instalments above. The estimate need not be perfect: the law penalises shortfalls, not honest estimation errors, and you can revise upward in later instalments as income crystallises. A practical approach is to recompute quarterly — after each quarter’s actual income is known — rather than relying on an April guess all year.

• Threshold: net tax payable above 10,000 rupees triggers advance tax.
• Dates: Jun 15 (15%), Sep 15 (45%), Dec 15 (75%), Mar 15 (100%).
• Senior citizens: exempt if they have no business income.
• Capital gains: advance tax due only from the quarter the gain arises.

The penalties for getting it wrong

Two interest provisions enforce the schedule. Section 234B levies 1 per cent per month on the shortfall if you paid less than 90 per cent of your total liability as advance tax. Section 234C levies 1 per cent per month for three months on each quarterly shortfall — deferring instalments to March to keep money longer costs you directly. These are not fines you can argue away; they compute automatically when you file. The flip side is equally mechanical: overpay and the excess returns as a refund with interest. Paying advance tax is done online in minutes through the e-pay facility on the income tax portal using challan ITNS 280 — select the right assessment year, keep the challan counterfoil, and the credit appears in Form 26AS.

FAQs

Is advance tax applicable to salaried individuals? Only if TDS falls short of the 10,000-rupee threshold — typically when there is significant income beyond salary.

What if my income is unpredictable? Estimate quarterly and revise at each instalment; the law accommodates genuine estimation, penalising only the shortfall via interest.

Can I pay the whole amount in March? You can, but 234B and 234C interest will apply to the deferred quarters — quarterly payment is cheaper.

Advance tax is simply TDS for the self-directed: the same pay-as-you-earn principle, administered by you instead of your employer. Estimate honestly, pay quarterly, revise as income crystallises — and March will bring a filed return instead of a penalty notice.

Compiled by the Khabar 24h Editorial Desk from publicly available sources.