As the financial year 2025-26 nears its end, taxpayers must pay the fourth and final advance tax instalment by March 15.
Individuals, freelancers, professionals, and businesses must make the payments on time if their total tax liability exceeds Rs 10,000 after Tax Deducted at Source (TDS), Tax Collected at Source (TCS), and available tax credits.
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Missing the deadline can lead to interest penalties under the Income Tax Act.
What is Advance Tax?
Advance tax is paying income tax in parts during the year instead of all at once when filing the return. It helps spread the tax burden and ensures steady revenue for the government.
Who Needs to Pay Advance Tax?
Advance tax is mandatory for taxpayers whose total tax liability after TDS and other credits exceeds ₹10,000. This generally includes:
- Freelancers and independent consultants.
- Self-employed professionals such as doctors, lawyers, and architects.
- Business owners and partnership firms.
- Individuals earning income from capital gains, rent, dividends, or interest.
- Employees with additional income not fully covered by TDS, such as stock market profits, cryptocurrency gains, or side businesses.
Resident senior citizens aged 60 or above who do not have business or professional income are exempt from advance tax.
Taxpayers opting for the presumptive taxation scheme must pay 100% of their advance tax in a single instalment by Mar. 15 instead of following the quarterly schedule.
How to Pay Advance Tax
Advance tax can be paid online through the Income Tax Department's e-payment facility using Challan ITNS-280. Companies and taxpayers subject to audit under Section 44AB are required to make payments online, while others may also use digital payment methods for convenience.
Penalties for Delay or Short Payment
Failure to pay advance tax on time attracts interest under Sections 234B and 234C of the Income Tax Act.
- Section 234C - Applies if advance tax instalments are short or delayed, with interest charged at 1% per month on the unpaid portion.
- Section 234B – Applies if less than 90% of the total tax liability is paid by March 31, with interest charged at 1% per month.
Even a small delay or underpayment can result in significant interest over time. Taxpayers who miss the March 15 deadline still have the opportunity to pay the remaining tax before March 31, though interest provisions will apply.
Advance Tax Instalment Schedule for FY 2025-26
The Income Tax Department requires advance tax to be paid in stages during the year:
- June 15, 2025 – 15% of estimated tax liability
- Sept. 15, 2025 – 45% of estimated tax liability
- Dec. 15, 2025 – 75% of estimated tax liability
- March 15 – 100% of estimated tax liability
The March instalment is the final opportunity to settle the full tax liability for the financial year.
Revising Income During the Year
Taxpayers should revise their advance tax calculations if they receive additional income during the year, such as:
- Bonus or salary increments
- Capital gains from stocks or mutual funds
- Dividends or interest income
- Gifts, lottery winnings, or online gaming income
- Rental income or family pension
Failure to include additional income in advance tax calculations can result in interest charges later.
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