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What is advance tax in income tax?

What is advance tax in income tax?

18-Nov-2025

Tax

Answer By law4u team

Advance tax in India is a system of paying income tax in installments before the end of the financial year, rather than paying the entire tax liability at the time of filing the income tax return. It is sometimes called “pay-as-you-earn” tax and applies to taxpayers whose tax liability exceeds ₹10,000 in a financial year. Here’s a detailed explanation: 1. Definition of Advance Tax Advance tax is the payment of estimated income tax in advance, based on the income earned during the year. It ensures that the government receives tax revenue throughout the year, instead of waiting until the end of the financial year. Key points: It is mandatory for self-employed individuals, professionals, and businesses. Salaried employees usually have tax deducted by the employer under TDS (Tax Deducted at Source), so advance tax may not apply unless they have additional income. The tax is calculated on total estimated income, including salary, business profits, capital gains, interest, and other sources. 2. Who Should Pay Advance Tax? Advance tax is required if: Total tax liability for the year exceeds ₹10,000 after accounting for TDS. Taxpayers include: Self-employed professionals (doctors, lawyers, consultants, etc.) Business owners Investors with significant capital gains or interest income Freelancers and contractors Salaried employees generally do not pay advance tax separately unless they have other sources of income. 3. Due Dates for Advance Tax Payment The Income Tax Department specifies installment dates for advance tax payments: For individuals and corporate taxpayers (other than companies under presumptive scheme): 15th June: 15% of estimated tax 15th September: 45% of estimated tax (cumulative) 15th December: 75% of estimated tax (cumulative) 15th March: 100% of estimated tax For taxpayers under the presumptive taxation scheme (Section 44AD, 44ADA, 44AE): 15th March: 100% of estimated tax > These dates allow taxpayers to pay tax in stages based on their estimated income, reducing the burden of paying a lump sum at the year-end. 4. How Advance Tax Is Calculated 1. Estimate total income for the financial year from all sources. 2. Deduct exemptions, deductions, and reliefs (like 80C, 80D, etc.). 3. Compute total tax liability based on applicable tax slabs. 4. Subtract TDS already deducted by employers or banks. 5. Pay the balance in installments according to the due dates. Example: Estimated total tax: ₹1,00,000 TDS deducted by employer: ₹40,000 Balance to pay as advance tax: ₹60,000 Payment schedule: 15th June: ₹15,000 15th September: ₹15,000 15th December: ₹15,000 15th March: ₹15,000 5. Consequences of Not Paying Advance Tax If advance tax is not paid or underpaid: Interest is charged under Sections 234B and 234C of the Income Tax Act. The interest rate is usually 1% per month for the shortfall from the due date until payment. Avoiding advance tax can result in extra financial burden at the end of the year. 6. Payment Methods Advance tax can be paid through: Online payment via the income tax portal (challan ITNS 280) Bank branches authorized to collect advance tax Net banking or mobile banking apps of banks Payment can be made through a single installment or multiple installments, but following the due dates avoids interest penalties. 7. Summary Advance tax is a system of paying estimated income tax in advance, before filing the final return. It is mandatory for taxpayers whose tax liability exceeds ₹10,000. Payments are made in installments through the year. Proper advance tax payment avoids interest and penalties. For salaried individuals, advance tax is usually covered by TDS, but self-employed or those with other incomes must calculate and pay it.

Answer By Ayantika Mondal

Dear Client, Advance Tax is simply a system where you pay your Income Tax liability in installments during the financial year (the year in which the income is earned), rather than pay it in form of a lump sum at the end of the year. It has been commonly called a Pay as You Earn scheme. Key Points of Advance Tax: Applicability (Who must pay) Any individual (an individual, a HUF, a company) having an estimated net tax liability 10,000 or over during the financial year (excluding TDS/TCS). This is primarily relevant to income sources where tax is not deducted at source (TDS), including: • Earnings related to business and profession. • Rental income. • Interest Revenue (e.g., on Fixed Deposits, otherwise covered by TDS). • Capital Gains. Exception to Senior Citizens: Senior citizen (age 60 years or above) who has no income earned in any business or profession is not supposed to pay his/her advance tax. Payment Schedule (Due Dates of Regular Taxpayers) The amount of advance tax is usually paid in four installments depending on the cumulative percentage of the total estimated tax payable: Due date (On or before) Cumulative Amount Payable. • June 15th: 15% of the full amount of tax owed. • September 15th: 45% of the total tax due. • December 15th: 75% of the total tax bill. • March 15th:100% of the full tax bill. The persons filing under the Presumptive Taxation Scheme (Section 44AD or 44ADA) must pay their full 100% advance tax at one instalment on or before March 15th. Consequences of Default: In the event that you do not make the amount of advance tax payable at the due dates or the amount of advance tax you pay is less than 90 percent of your tax liability as at the end of the year, then you will be subject to an interest charge according to the provisions of Section 234B and 234C of the Income Tax Act. It is a mechanism that helps the government to keep a continuous flow of revenues and allow taxpayers to escape the financial strain of making a large lump-sum payment at the year end. I hope this answer helps; if you have any further questions please don't hesitate to contact us. Thank you

Answer By Anik

Dear client, Advance tax simply means the amount of income tax that is paid in advance rather than a lump-sum payment at the year-end. It is also called earn tax and it is to be paid in installments as per the due dates decided by the income tax department. It is an advance tax mechanism where the tax is paid during the financial year by the taxpayer instead of paying while filing the returns. If the tax on such income exceeds Rs. 10,000 for the financial year, the taxpayer should pay advance tax. Here the income tax is paid through multiple installments before the end of the financial year, instead of a lump sum payment after the end of the financial year. Section 207-219 of the Income Tax Act deals with advance tax. The taxpayer calculates the estimated total income at the beginning of the financial year, thereby estimating his tax liability. The advance tax payments have to be made in fixed percentage through four installments as per the due dates provided by the income tax department. Applicability As per section 208 of the Income tax act, any assessee whose estimated tax liability for the financial year exceeds Rs 10,000, he or she is required to pay advance tax. If TDS is already deducted against a person, and still Rs 10,000 tax is payable as per estimation, he /she also needs to pay advance tax. Further, this provision applies to all taxpayers, salaried individuals, freelancers, and businesses. It is important to note that people aged 60 years or more who do not have income from any business or profession during the financial year are exempt from paying advance tax. However, senior citizens (60 years or more) having business or professional income must pay advance tax. Due date and the Percent of Advance Tax payable It is payable in four installments. They are as follows : 1. 15 June : 15% of tax liability 2. 15th September: 45% of total tax due 3. 15 December: 75% of total tax due 4. 15 March: 100% of tax liability Advance Tax Late Payment Interest If there is default or delay in the payment of advance tax then as per Section 234B, the taxpayer must pay at least 90% of the total taxes as advance tax or TDS/TCS by 31st March. Failure to make advance tax payments will result in an interest @1% on the unpaid amount. I hope this answer was helpful. For any further queries please do not hesitate to contact us.