Advance Tax: Meaning, Payment, Due Dates, Calculation & Benefits

Advance Tax, also known as ‘Pay as You Earn’ tax, is the income tax that individuals and businesses must pay in advance rather than in a lump sum at the end of the financial year. This tax is applicable when the total tax liability exceeds ₹10,000 in a financial year. The government collects Advance Tax to ensure a steady flow of revenue and to reduce the burden of year-end payments.

Who Needs to Pay Advance Tax?

The following individuals and entities must pay Advance Tax:

• Salaried employees with additional income from freelancing, rental properties, or    investments.
• Self-employed professionals such as doctors, lawyers, and consultants.
• Businesses with an annual tax liability exceeding ₹10,000.
• Companies, LLPs, and startups under the presumptive taxation scheme.
• Freelancers and digital entrepreneurs earning from multiple sources.

Advance Tax Payment Due Dates for FY 2025-26

Due Date	Advance Tax Payable
15th June	15% of total tax
15th September	45% of total tax
15th December	75% of total tax
15th March	100% of total tax

How to Calculate Advance Tax?

Follow these steps to calculate your Advance Tax liability:

1. Estimate your total income for the financial year (salary, business, rental, capital gains, etc.).
2. Deduct eligible exemptions & deductions under sections 80C, 80D, and other provisions.
3. Calculate your total tax liability based on the latest Income Tax Slabs (Old or New Regime).
4. Deduct TDS (Tax Deducted at Source) already deducted on salary, interest, or other earnings.
5. Pay the balance tax liability in advance as per the due dates.

Advance Tax Payment Online – Step-by-Step Guide

You can pay your Advance Tax online through the Income Tax Department’s portal:

1. Visit the e-Pay Tax Portal
2. Choose Challan ITNS 280 for individual taxpayers.
3. Select Advance Tax (100) under the ‘Tax Applicable’ section.
4. Enter PAN, assessment year, and payment details.
5. Complete payment using net banking, debit card, or UPI.
6. Download the payment receipt (Challan 280) for tax filing.

Benefits of Paying Advance Tax on Time

• Avoids Interest & Penalties – Late payment leads to interest under Sections 234B & 234C.
• Reduces Year-End Burden – Helps in better financial planning.
• Improves Business Cash Flow – Enables systematic tax payments.
• Boosts Creditworthiness – Compliance enhances loan approvals & financial credibility.

Penalty for Late Payment of Advance Tax

• Interest under Section 234B – 1% per month for not paying 90% of total tax before March 15.
• Interest under Section 234C – 1% per month for missing quarterly installment deadlines.

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Advance Tax FAQs

Q1: What happens if I miss an Advance Tax deadline?

Interest under Sections 234B & 234C will apply. However, you can still pay advance tax before 31st March.

Q2: Can a salaried individual pay Advance Tax?

Yes, if they have additional income from freelancing, rent, or capital gains exceeding ₹10,000 in tax liability.

Q3: How to claim an Advance Tax refund?

If you overpaid Advance Tax, claim a refund while filing ITR. The IT Department will refund the excess amount with 6% interest under Section 244A.