The first installment of advance tax for Tax Year 2026–27 (FY 2026–27) fell due on Monday, June 15. To make the process timely, the government levies penalties on missing these deadlines.
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As per the Income Tax Act, taxpayers whose tax liability exceeds Rs 10,000 after TDS/TCS must pay advance tax in installments instead of a lump sum. However, those under the presumptive taxation scheme must pay 100% of their advance tax in a single installment before the end of the financial year.
Who Pays Advance Tax?
Advance tax is a “pay-as-you-earn” system under the tax laws in India. Here, the tax is paid in four installments instead of a lump sum at ITR filing. It is governed under sections 403 to 410.
“Advance Tax, also known as the "Pay-As-You-Earn" scheme, requires taxpayers to pay income tax during the same financial year in which the income is earned,” the tax department explains.
It applies to all taxpayers, including salaried individuals, freelancers, and businesses. For salaried employees, tax is usually deducted by the employer through TDS. Advance tax is required only if there is additional income not covered by salary TDS.
Usually, advance tax needs to be paid by freelancers and consultants, investors who have earned capital gains, individuals with significant rental or interest income, among others. Senior citizens (age 60 or above) without business or professional income are exempted from this provision.
Penalty For Missing Advance Tax Deadline:
As per the rules, taxpayers are required to pay at least 15% of their total tax liability in the first installment. Non-compliance with advance tax rules can lead to penalties under Sections 424 and 425 of the Income-tax Act, 2025 (formerly Sections 234B and 234C of the Income-tax Act, 1961). The Assessing Officer may also issue a demand notice in Form 28 for unpaid advance tax.
As per the rules, any non-payment or short-payment of advance tax attracts interest at 1% per month. This can increase your overall tax liability, resulting in loss of savings.
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