Advance Tax Payment in India: Everything You Need to Know

Posted on Wednesday, April 2nd, 2025 | By IndusInd Bank

Let’s be honest—everybody struggles when paying taxes. But what’s worse than paying taxes? Paying extra penalties because you missed a deadline. That’s exactly what can happen if you don’t keep up with advance tax payments.

If you earn money beyond your salary—freelancing, business profits, capital gains, rental income—you may need to pay your taxes in instalments throughout the year instead of waiting until March. It’s like paying your electricity bill in parts instead of getting a massive shock at the end.

So, what exactly is advance tax? Who needs to pay it? How can you ensure you never miss a deadline? Read on to learn more.

What is Advance Tax?

Advance tax is exactly what it sounds like! That is, paying your tax in advance instead of waiting until the financial year ends. The government doesn’t like surprises (especially when it comes to revenue), so they ask taxpayers to pay in instalments rather than in one lump sum.

Who Needs to Pay Advance Tax?

You must pay advance tax if:

• Your total tax liability for the year (after deducting TDS) is more than ₹10,000.
• You have income that isn’t fully covered by TDS, such as:
  • Business or professional income
  • Freelancing or consulting fees
  • Capital gains from shares or property
  • Interest from fixed deposit
  • Rental income

Who is off the hook?

• Salaried individuals whose employer deducts TDS properly.
• Senior citizens (aged 60 and above) who do not have business income.

If you fall into the first category, your next question is probably: When exactly do I have to pay this tax? Let’s look at the deadlines.

Advance Tax Payment Due Dates for FY 2025-26

The government wants your money in instalments, and here’s how they schedule it:

Missing these dates isn’t just a simple mistake. It comes with penalties, which we’ll discuss in this blog ahead. But let’s talk numbers first.

Also Read: Your 7-Day Action Plan: Last-Minute Tax-Saving Strategies for Smart Investors

How to Calculate Advance Tax?

Calculating taxes might not be your idea of fun, but let’s simplify it.

Step 1: Estimate Your Total Income

Add up your income from:

• Salary (if applicable)
• Business or freelancing
• Interest on savings or FDs
• Rental income
• Capital gains

Step 2: Subtract Deductions and Expenses

If you’re self-employed, take out business expenses and deductions under:

• Section 80C: EPF, PPF, ELSS, Life Insurance Premiums, etc.
• Section 80D: Health Insurance
• Section 24(b): Home Loan Interest
• And more!

You can also deduct past losses. However, please note that some deductions and exemptions do not apply if you opt for the new tax regime. So, you will have to take note of this while calculating your taxable income.

Step 3: Calculate Taxable Income & Tax Payable

Use the latest income tax slab rates to compute your tax. The tax slabs and tax rates are different for the old tax regime and new tax regime. So, calculate carefully.

If applicable, you will also have to add surcharge or health and education Cess to your calculated tax liability.

Step 4: Adjust for TDS (If Any)

If you have any TDS that has already been accounted for during the financial year, subtract that amount from your total tax liability.

Step 5: Pay Tax in Instalments

Break it down as per the advance tax schedule.

Abiding by this advance tax payment schedule will ensure there are no nasty surprises at the end of the year!

How to Pay Advance Tax Online?

Gone are the days of standing in long bank queues. Paying advance tax online is quick and simple:

• Visit the Income Tax e-filing portal (https://www.incometax.gov.in).
• Click on e-Pay Tax and log in.
• Select Advance Tax under tax payment options.
• Enter your details and choose a payment mode (Net Banking, Debit Card, UPI, etc.).
• Make the payment and save the receipt for reference.

You can also pay at authorised bank branches, but honestly, online is the way to go.

What Happens if You Miss the Advance Tax Last Date?

Let’s say you forgot an instalment. What now?

You’ll have to pay a penalty.

• Section 234B: If you don’t pay at least 90% of your total tax by 31st March, you’ll be charged 1% interest on the outstanding amount.
• Section 234C: If you miss or underpay any instalment, you’ll be charged 1% interest per month on the shortfall.

Late payments = more money out of your pocket. Not fun.

Tips to Never Miss Your Advance Tax Payment

Also Read: FY 2025-26 Investment Blueprint: How to Build a Future-Ready Portfolio

Common Mistakes to Avoid When Paying Advance Tax

• Underestimating Your Income: If you anticipate your income too low, there are more chances of underpaying now and paying higher penalties later.
• Forgetting Interest or Rental Income: These are taxable and should be factored in.
• Ignoring TDS Deductions: If TDS is deducted on your income, ensure you adjust your advance tax accordingly.

Wrapping Up!

Don’t treat advance tax as another financial chore. Consider it as a great way to plan your taxes and avoid unnecessary stress. It will help you spread your advance tax payments throughout the year, avoiding last-minute burdens and saving on penalties. So, mark those dates on your calendar, crunch those tax numbers, and pay them on time. Your future self (and your wallet) will thank you!