Who needs to pay, and why it's not optional
Advance tax isn't a choice for those it applies to — the ₹10,000 threshold (after TDS credit) is low enough that most individuals with more than a straightforward salary, and virtually every business, cross it. It exists because the government collects tax as income is earned rather than waiting until the following year's return is filed, and interest applies specifically to discourage underpayment through the year even where the final tax liability, once computed at filing, turns out correct.
Business owners and professionals whose income doesn't have TDS deducted at source — most self-employed income, capital gains, and rental income above what's covered by TDS provisions — are the taxpayers most likely to actually owe advance tax, since salaried employees typically have most of their liability already covered through employer TDS.
The instalment schedule
| Due date | Cumulative % of year's estimated liability |
|---|---|
| On or before 15 June | 15% |
| On or before 15 September | 45% |
| On or before 15 December | 75% |
| On or before 15 March | 100% |
These are cumulative figures, not instalment-by-instalment amounts — the 45% due by September is the total paid to date, not an additional 45% on top of the June payment. A taxpayer under the presumptive scheme (Section 44AD or 44ADA) has a simpler single-instalment structure: 100% of the estimated liability, in one payment, by 15 March.
The advance tax process, step by step
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Estimating annual income
Income for the full year is estimated ahead of each instalment date, updated as actual figures for the months already elapsed become clearer.
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Computing estimated tax liability
Tax is computed on the estimated income under the applicable regime, and reduced by TDS already deducted or expected to be deducted during the year.
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Checking against the cumulative schedule
The amount already paid in earlier instalments is checked against what the cumulative percentage for the current due date requires, and the instalment amount is computed as the difference.
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Payment
The instalment is paid online through the tax portal, generating a challan that's referenced when the return is eventually filed.
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Revisiting the estimate at each instalment
Income estimates are revisited at each due date rather than fixed once at the start of the year, since a significant change in income partway through the year should be reflected in the remaining instalments.
Interest for shortfall
| Situation | Interest |
|---|---|
| Advance tax paid is less than 90% of the total tax liability for the year (Section 234B) | 1% per month from 1 April following the financial year, until the tax is paid |
| A specific instalment falls short of the cumulative percentage due by that date (Section 234C) | 1% per month on the shortfall for that instalment, computed separately for each of the four due dates |
These two sections are independent of each other — Section 234C can apply for a shortfall at an interim date even if the full year's liability is ultimately paid on time, and Section 234B applies separately if the total paid by year end falls short of 90% of the final liability.
Practical notes from our engagements
- Income estimated once at the start of the year and never revisited. A business or professional whose income genuinely fluctuates through the year — seasonal businesses, or anyone with irregular capital gains — needs to revisit the estimate at each instalment date, not carry the same projection forward from June to March.
- Capital gains realised late in the year overlooked for the March instalment. A capital gain realised in January or February still needs to be reflected in the 15 March instalment — waiting until the return is filed to account for it triggers Section 234C interest that was avoidable.
- TDS credit assumed but not confirmed. Reducing the advance tax estimate for TDS that's expected but hasn't actually been deducted or deposited by the payer can leave a real shortfall if the deduction doesn't happen as assumed.
- Presumptive taxpayers paying in four instalments unnecessarily. Taxpayers under Section 44AD or 44ADA only need a single instalment by 15 March — following the general four-instalment schedule isn't wrong, but it isn't required either.
How we handle advance tax
We revisit the income estimate at each instalment date rather than fixing it once in June, particularly for clients whose income is genuinely variable through the year. Where a late capital gain or other irregular income event occurs, we factor it into the next instalment promptly, since that's usually cheaper than absorbing Section 234C interest and correcting it only when the return is filed.
Related services
Frequently asked questions
Who needs to pay advance tax?
Anyone whose estimated tax liability for the year, after TDS credit, is ₹10,000 or more — which covers most businesses and professionals, and many individuals with income beyond a straightforward salary.
Is there an exemption from advance tax for senior citizens?
Yes — a resident senior citizen (60 or above) with no income from business or profession is not required to pay advance tax.
What happens if I underpay an instalment?
Interest under Section 234C applies to the shortfall for that specific instalment, computed separately for each of the four due dates through the year.
Is Section 234B different from Section 234C?
Yes — Section 234C addresses shortfalls at each interim instalment date. Section 234B applies separately if total advance tax paid by year end is less than 90% of the actual final liability.
Do presumptive taxpayers follow the same four-instalment schedule?
No — taxpayers under Section 44AD or 44ADA pay a single instalment of 100% of estimated liability by 15 March, rather than the four-instalment schedule.
Can I revise my advance tax estimate partway through the year?
Yes, and it's advisable to — income estimates should be updated at each instalment date as the year's actual results become clearer, rather than fixed once at the start.
If most of my tax is already covered by TDS, do I still need to pay advance tax?
Only on the shortfall — advance tax liability is computed net of TDS already deducted or reasonably expected during the year, so a salaried individual with most tax covered by employer TDS may have little or no advance tax to pay.