The deadline to pay the second instalment of advance tax for Assessment Year 2026-27 ends today, Sept. 15. Taxpayers with income from sources other than salary need to pay the instalment on time.
Under the system, taxpayers pay their estimated tax liability in instalments instead of paying the full amount while filing their income tax return (ITR).
What Is Included Under Advance Tax?
Any taxpayer whose estimated tax liability for a financial year, after taking into account TDS/TCS, is over Rs 10,000 is required to pay advance tax. This includes freelancers, salaried individuals, professionals and businesses.
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When a taxpayer earns income such as interest from fixed deposits, rental income, dividends, capital gains from shares or mutual funds, or income from freelance work, they need to pay advance tax if their estimated tax liability exceeds Rs 10,000 after accounting for TDS/TCS.
How To Check Advance Tax From Different Income Sources?
Estimating tax liability can be tricky when the amount has to be paid in instalments and the income does not have a predictable pattern. The first step is to determine the applicable tax regime. The different slab rates and deduction rules under the old and new tax regimes impact the overall tax calculation.
Calculate the total income for the financial year from salary and other sources. Estimate the tax under the applicable tax regime. Make sure to add the 4% health and education cess.
If there is a mid-year rise in income, taxpayers must revise the total amount accordingly.
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Check the Annual Information Statement (AIS) before finalising any estimated liability when it comes to interest on savings accounts and fixed deposits.
If there are capital gains or similar income after the June instalment but before September, the tax on the gains can be included and paid with the September instalment.
Subtract TDS and TCS already deducted, as well as the advance tax paid in June. If the remaining liability is over Rs 10,000, ensure that the total advance tax payments amount to 45% of the estimated annual liability by Sept. 15.
What Happens If The Advance Tax Instalment Is Not Paid?
Failure to pay the advance tax by the deadline can attract interest at 1% per month for a period of three months.
A taxpayer who has a shortfall against the 45% cumulative payment required by Sept. 15 may face interest of around 3% on the shortfall.
If the taxpayer's overall advance tax payments are too low, interest of 1% per month may be charged. This is applicable from the start of the next financial year until the dues are paid.
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