Enter your estimated income and TDS to calculate your advance tax liability and quarterly instalment amounts.
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What is advance tax?
Advance tax is income tax paid in instalments during the financial year itself, rather than as a lump sum when filing the return.
Under Section 403 of the Income Tax Act, 2025, advance tax is payable on the current income of each financial year. The principle is "pay as you earn", as income builds through the year, tax is settled in parallel, so neither the taxpayer nor the government is left with a large unplanned settlement at year-end.
Who has to pay advance tax?
Under Section 404 of the Income Tax Act, 2025, advance tax is payable when the estimated tax liability for the year, after deducting TDS and TCS, is ₹10,000 or more.
This applies to:
Freelancers and consultants: TDS may be deducted on professional fees, but the remaining liability after TDS still exceeds ₹10,000.
Business owners and self-employed individuals: No employer deducts tax on their behalf, so the full obligation must be settled through advance tax.
Salaried employees with additional income: From house property, capital gains, FD interest, or freelance work that takes the remaining liability above the threshold
Investors: When capital gains or dividend income creates a liability not fully covered by TDS at source.
How is advance tax calculated?
Under Section 405 of the Income Tax Act, 2025, the formula is:
Advance Tax = Income Tax on Estimated Annual Income − TDS/TCS deducted during the year
Estimate your total income for the financial year, compute the income tax on it at the applicable rates (including cess), then subtract any TDS or TCS already deducted on income included in that estimate. The result is the advance tax payable for the year.
Example | |
|---|---|
Annual income estimate | ₹18,00,000 |
Estimated income tax (at applicable rates, including cess) | ₹2,40,000 |
TDS already deducted on professional fees | ₹60,000 |
Advance tax payable | ₹1,80,000 |
This ₹1,80,000 is then split across four instalments:
Instalment | Due date | Cumulative % | Amount payable |
|---|---|---|---|
1st | 15 June | 15% | ₹27,000 |
2nd | 15 September | 45% | ₹54,000 |
3rd | 15 December | 75% | ₹54,000 |
4th | 15 March | 100% | ₹45,000 |
Each instalment pays the difference between what is now cumulatively due and what was paid in earlier instalments.
What is the interest on late or underpaid advance tax?
Two interest charges apply under the Income Tax Act, 2025 when advance tax is not paid correctly.
Section 425 — instalment shortfall: If the cumulative amount paid by a due date falls short of the required percentage, interest is charged on the shortfall at 3% for each of the first three instalments and at 1% for the fourth.
No interest is charged on shortfalls arising solely from capital gains, dividend income, or business income accruing for the first time in that year, provided the tax on such income is paid in full in the remaining instalments or by 31 March.
Section 424 — overall default: If total advance tax paid during the year falls below 90% of the assessed tax, interest is charged at 1% per month from 1 April of the following year until the date of assessment.
Who does not have to pay advance tax?
Two categories are exempt under the Income Tax Act, 2025.
Senior citizens with no business income: A resident individual aged 60 or above who has no income under the head "Profits and gains of business or profession" is not required to pay advance tax, under Section 403(3). Their full tax obligation is settled at the time of filing the return.
Presumptive taxpayers: If income is declared under the presumptive taxation scheme as per Section 58(2) of the Income Tax Act, 2025, the entire advance tax for the year is payable as a single instalment on or before 15 March, not across four instalments.
