Advance Tax in India: Who Pays, Due Dates & How (2026)

If you run a business, freelance, or earn income that is not fully covered by TDS, the income tax department does not wait until the year ends to collect. It expects you to pay tax during the year, as the money comes in. That system is called advance tax, and understanding it is one of the simplest ways to avoid an unpleasant bill plus interest at filing time.

This guide explains what advance tax is, who has to pay it, the due dates and instalment percentages for 2026, how to calculate and pay it, and what interest you face if you fall short. It is written for Indian small business owners, professionals and freelancers, so the examples reflect how most SMB income actually behaves.

What advance tax actually means

Advance tax is simply income tax paid in instalments during the financial year rather than as one lump sum after it ends. People often call it the pay-as-you-earn approach. The idea is fair when you think about it: the government funds itself steadily through the year, and you spread your own tax bill across four dates instead of scrambling for a large sum in one go.

Salaried employees already pay advance tax without noticing, because their employer deducts TDS from every payslip and deposits it. The gap opens up for people whose income arrives without much tax deducted at source: business owners, traders, consultants, doctors, lawyers, freelancers, landlords with sizeable rent, and anyone with large capital gains or interest income. For them, advance tax is an active responsibility, not something that happens automatically.

Who has to pay advance tax

The rule is based on your net expected tax liability for the year. Work out roughly how much tax you will owe on your total estimated income, subtract the TDS that will already be deducted on your behalf, and look at what remains. If that remaining amount is expected to cross the threshold set in the Income-tax Act, you are required to pay advance tax. The threshold has long been quoted at ten thousand rupees, but you should always confirm the figure for the current year, because limits can be revised.

Common examples of people who must pay advance tax:

1. Freelancers and consultants — clients often pay with little or no TDS, so a large share of the tax lands on you directly.
2. Shop owners, traders and manufacturers — business profit usually has no TDS attached, so the whole liability is yours to pay in advance.
3. Professionals such as doctors, architects and CAs earning fee income.
4. Salaried people with big side income — for example, large capital gains, rental income or interest that pushes their liability past the threshold.

There is a helpful exemption to remember: a resident individual who is a senior citizen and does not have income from a business or profession is generally not required to pay advance tax. For everyone else running a business, the obligation stands.

Advance tax due dates and instalment percentages

For most taxpayers, advance tax is paid in four instalments across the financial year. What matters is the cumulative percentage you should have paid by each date, not a flat quarterly split. The schedule generally works like this:

1. On or before 15 June — at least 15 percent of your estimated total tax.
2. On or before 15 September — at least 45 percent (cumulative), so a further 30 percent on top of the first instalment.
3. On or before 15 December — at least 75 percent (cumulative).
4. On or before 15 March — 100 percent of your estimated tax for the year.

Taxpayers who opt for the presumptive taxation scheme get a lighter deal: they can pay their entire advance tax in a single instalment on or before 15 March. This is one of the practical attractions of the presumptive route for eligible small businesses and professionals, which we will touch on shortly.

How to calculate your advance tax

You do not need perfect numbers — you need a reasonable estimate, revised each quarter as your real income becomes clearer. The steps are straightforward:

1. Estimate your total income for the year across all heads: business or professional income, salary, rent, interest, capital gains and any other source.
2. Subtract eligible deductions you plan to claim, then apply the income tax slab rates for your chosen regime to arrive at the tax on total income.
3. Add applicable cess and any surcharge to get your gross tax liability.
4. Subtract the TDS and TCS that will already be deducted on your income during the year.
5. The balance is your advance tax, which you split across the quarterly dates using the cumulative percentages above.

Because income for a business rarely arrives evenly, revise the estimate before each date. If you land a big project in the third quarter, your December and March instalments should rise to catch up. Clean records make this painless — when your invoices, payments and expenses are all in one place, estimating quarterly income takes minutes rather than a stressful evening of spreadsheets. That is exactly the kind of clarity a tidy billing and payments system gives you.

How to pay advance tax

Advance tax is paid using Challan 280, which today runs through the e-Pay Tax service on the income tax e-filing portal (many banks also route you there). The process is quick:

1. Log in to the income tax e-filing portal and open the e-Pay Tax section.
2. Choose the correct assessment year and select the type of payment as advance tax.
3. Enter the tax amount under the right heads, then pay by net banking, UPI or card.
4. Save the challan receipt. Note the BSR code, challan serial number and date, as you will enter these when filing your return so the payment is credited to you.

Interest for shortfall: sections 234B and 234C

Miss the dates or underpay, and the department charges simple interest — not a penalty as such, but it adds up. There are two provisions to know:

1. Section 234C charges interest when you fail to pay the required cumulative share by each quarterly deadline. In other words, it targets uneven or late instalments during the year.
2. Section 234B charges interest when your total advance tax paid for the year falls short of the required level, and it keeps running from the start of the assessment year until you clear the balance.

The interest is calculated at a monthly rate on the shortfall, so the longer you delay, the more it costs. The takeaway is simple: even a rough, honest estimate paid on time is cheaper than a precise number paid late. If your income genuinely spikes late in the year, pay the catch-up amount as soon as you can rather than waiting for filing season.

The presumptive scheme: a lighter path for small businesses

Many small businesses and professionals in India are eligible for presumptive taxation, where profit is assumed to be a fixed percentage of turnover or gross receipts, cutting out detailed profit-and-loss accounting. For advance tax, the big benefit is the single-instalment rule: eligible taxpayers can pay the whole amount by 15 March instead of juggling four dates. Eligibility and the applicable percentages have specific conditions and turnover limits, so confirm whether you qualify before relying on it. Even under this scheme, keeping clean turnover records matters, because the tax is calculated directly on your receipts.

Whichever route you take, the same habit protects you: know your numbers, estimate honestly, and set money aside as you earn. Advance tax stops being stressful the moment your income and invoices are organised. For a broader picture of staying compliant as you grow, our guide to running a small business in India pairs well with this one.

Quick recap

Advance tax is income tax paid in instalments during the year. If your tax after TDS is expected to cross the threshold, you must pay it, typically across four dates — 15 June, 15 September, 15 December and 15 March — at cumulative shares of about 15, 45, 75 and 100 percent. Estimate your income, subtract TDS, pay the balance through Challan 280, and keep the receipts. Skip it and Sections 234B and 234C add interest. Presumptive taxpayers get a simpler single March deadline. Estimate early, pay on time, and the rest is bookkeeping.