Advance Tax Payment: Complete Guide FY 2026-27
Advance Tax: What It Is, Who Pays It, and Why Missing It Costs You Money
Most salaried professionals never think about advance tax. Their employer deducts TDS every month, they file their ITR in July, and the tax process feels complete.
But if you have income beyond your salary, such as FD interest, rental income, capital gains from stocks or mutual funds, freelance income, or dividends, you may have an advance tax liability that your employer’s TDS does not cover. Ignoring it does not make it go away. It results in interest charges under Sections 234B and 234C that accumulate quietly until you file your ITR.
With 7 years of experience in income tax and personal finance, I have seen professionals surprised by unexpected interest demands at ITR time, simply because they were unaware of the advance tax requirement. This guide explains everything: who must pay, what the due dates are for FY 2026-27, how to calculate the liability, and how to pay it online in minutes.
What Is Advance Tax?
Advance tax is income tax paid in instalments throughout the financial year, instead of as a lump sum at the end. It is sometimes called “pay as you earn” tax because the principle is simple: as you earn income, you pay tax on it progressively rather than waiting until year end.
The government requires advance tax because it needs a steady cash flow throughout the year. For taxpayers, paying in instalments is also easier on cash flow than a large single payment.
Who Must Pay Advance Tax?
Any individual whose estimated tax liability for the financial year exceeds Rs. 10,000 after accounting for TDS must pay advance tax. This threshold applies to the net tax liability, not gross income.
Who typically needs to pay advance tax:
- Freelancers and consultants with professional income
- Business owners
- Salaried professionals with significant income from FD interest, rental income, or capital gains
- Investors who sell stocks, mutual funds, or property during the year
- Anyone with dividend income above a certain level
Who is exempt from advance tax:
- Salaried employees whose only income is salary with TDS deducted: Your employer handles this. No separate advance tax required.
- Senior citizens aged 60 and above who do not have income from business or profession: Exempt from advance tax entirely.
- Taxpayers under the Presumptive Taxation Scheme (Section 44AD, 44ADA): Can pay all advance tax in a single instalment by March 15.
Common situation for salaried professionals: If your salary is Rs. 12 lakh and your employer deducts correct TDS, you do not need to pay advance tax. But if you also have Rs. 60,000 in FD interest, Rs. 40,000 in rental income, and Rs. 80,000 in short-term capital gains from stocks, the tax on these additional incomes may exceed Rs. 10,000. In that case, advance tax applies on the additional income.
Advance Tax Due Dates for FY 2026-27
| Instalment | Due Date | Minimum % to be Paid |
|---|---|---|
| First Instalment | June 15, 2026 | 15% of estimated annual tax |
| Second Instalment | September 15, 2026 | 45% of estimated annual tax (cumulative) |
| Third Instalment | December 15, 2026 | 75% of estimated annual tax (cumulative) |
| Fourth Instalment | March 15, 2027 | 100% of estimated annual tax (cumulative) |
Important: The percentages above are cumulative. By September 15, you must have paid at least 45% of your total estimated liability for the year, including what you paid in June.
For Presumptive Taxation Scheme (Section 44AD, 44ADA):
Single instalment of 100% by March 15, 2027. No quarterly instalments required.
How to Calculate Your Advance Tax Liability
Follow these steps at the beginning of each financial year and revise your estimate each quarter as your income becomes clearer.
Step 1: Estimate Total Annual Income from All Sources
- Salary income (from employer)
- Rental income (if any)
- FD and savings account interest
- Capital gains from stocks, mutual funds, or property
- Freelance or consulting income
- Dividend income
- Any other income
Step 2: Estimate Deductions
Under old regime: Section 80C, 80D, HRA, standard deduction, home loan interest, etc. Under new regime: Standard deduction Rs. 75,000 only.
Step 3: Calculate Estimated Taxable Income
Total income minus all applicable deductions and exemptions.
Step 4: Apply Tax Slabs
Calculate tax on taxable income using applicable income tax slabs for FY 2026-27. Add 4% cess. Apply Section 87A rebate if eligible.
Step 5: Subtract TDS Already Deducted
Deduct TDS that your employer has already deducted or will deduct during the year. Also deduct any TDS deducted by banks on FD interest.
Step 6: Check If Advance Tax Is Required
If the remaining tax liability exceeds Rs. 10,000, you must pay advance tax.
Step 7: Calculate Instalment Amounts
Apply the percentage schedule above to determine how much to pay by each due date.
Advance Tax Calculation: Real Example
Priya is a salaried IT professional with additional income sources.
Income sources FY 2026-27:
- Salary: Rs. 14,00,000 (employer deducts TDS of Rs. 1,20,000)
- FD interest: Rs. 80,000 (TDS deducted by bank: Rs. 8,000)
- Rental income: Rs. 1,20,000
- Short-term capital gains (stocks): Rs. 60,000
Tax calculation (new regime):
| Item | Amount |
|---|---|
| Total income | Rs. 16,60,000 |
| Standard deduction | Rs. 75,000 |
| Taxable income | Rs. 15,85,000 |
| Tax on Rs. 15,85,000 (new regime slabs) | Rs. 2,07,750 |
| Add: 4% cess | Rs. 8,310 |
| Total tax liability | Rs. 2,16,060 |
| Less: TDS by employer | Rs. 1,20,000 |
| Less: TDS by bank on FD | Rs. 8,000 |
| Net advance tax required | Rs. 88,060 |
Since Rs. 88,060 exceeds Rs. 10,000, Priya must pay advance tax.
Instalment schedule:
| Due Date | Cumulative % | Amount to Pay |
|---|---|---|
| June 15, 2026 | 15% | Rs. 13,209 |
| September 15, 2026 | 45% | Rs. 26,418 (additional) |
| December 15, 2026 | 75% | Rs. 26,418 (additional) |
| March 15, 2027 | 100% | Rs. 22,015 (balance) |
What Happens If You Miss Advance Tax Payments
Two interest sections apply if advance tax is not paid correctly:
Section 234B: Non-payment or Insufficient Payment
If you have paid less than 90% of your total tax liability by March 31 of the financial year, interest under Section 234B applies at 1% per month on the shortfall from April 1 until the date you actually pay the tax or file the ITR.
Example: If your total tax is Rs. 1,00,000 and you paid only Rs. 60,000 by March 31, the shortfall is Rs. 40,000 (since 90% of Rs. 1,00,000 = Rs. 90,000). Interest of 1% per month on Rs. 40,000 accrues from April 1.
Section 234C: Deferment of Advance Tax Instalments
If you paid the correct total amount by March 15 but missed the quarterly deadlines, Section 234C interest applies at 1% per month for 3 months on the shortfall at each instalment date.
| Instalment Missed | Interest | Period |
|---|---|---|
| June 15 instalment | 1% per month on shortfall | 3 months |
| September 15 instalment | 1% per month on shortfall | 3 months |
| December 15 instalment | 1% per month on shortfall | 3 months |
| March 15 instalment | 1% per month on shortfall | 1 month |
One important relief: No interest under Section 234C is charged for the first instalment (June 15) if you paid at least 12% of the annual liability instead of the required 15%. Similarly, no interest for the second instalment if you paid at least 36% cumulative instead of 45%.
How to Pay Advance Tax Online: Step by Step
The entire process takes under 10 minutes through the income tax portal.
- Go to incometax.gov.in
- Click on “e-Pay Tax” under Quick Links (you do not need to log in for this)
- Enter your PAN and mobile number. Enter the OTP received.
- Select “Income Tax” and click Continue
- Select Assessment Year: 2027-28 (for FY 2026-27 advance tax)
- Select Type of Payment: Advance Tax (100)
- Enter the tax amount
- Choose payment method: Net banking, UPI, debit card
- Preview challan details and click Pay Now
- Download and save the challan receipt. Note the BSR code and challan serial number. You will need these when filing your ITR.
Common mistake: Many professionals select the wrong Assessment Year. For FY 2026-27 (income earned April 2026 to March 2027), the Assessment Year is 2027-28. Selecting 2026-27 will credit the payment to the wrong year and cause a mismatch in your ITR.
Advance Tax for Salaried Professionals with Capital Gains
This is the situation most salaried professionals are unaware of. If you sell stocks, mutual funds, or property during the year and have significant capital gains, advance tax may apply on those gains.
Capital gains are not covered by your employer’s TDS deduction. The tax on capital gains is your personal responsibility.
Practical approach: When you sell stocks or mutual funds and realize significant gains, calculate the approximate tax on those gains. If it exceeds Rs. 10,000 after accounting for any losses, add it to your advance tax calculation for the next instalment.
You do not need to calculate capital gains with perfect precision for each instalment. A reasonable estimate is acceptable. You settle the exact liability at ITR filing time, with interest if you underpaid during the year.
Advance Tax and the New Tax Regime
The tax regime you choose affects your advance tax calculation. Under the new regime, fewer deductions are available, so your taxable income and therefore your advance tax liability may be higher than under the old regime.
Calculate advance tax under whichever regime you plan to use for FY 2026-27. If you are unsure which regime is better for you, read the old vs new tax regime comparison before starting your advance tax planning.
Advance Tax for Senior Citizens
Senior citizens aged 60 and above who do not have any income from business or profession are completely exempt from advance tax. They pay their full tax liability at the time of ITR filing without any interest under Section 234B or 234C.
However, if a senior citizen has business or professional income, the regular advance tax rules apply. The exemption is only for seniors with salary, pension, FD interest, rental income, or capital gains as their income sources.
How to Verify Advance Tax Payments
After paying advance tax, verify it is credited correctly by checking Form 26AS (now Form 168) on the income tax portal. The advance tax payment should appear under “Details of Tax Collected at Source” or “Details of Tax Deducted at Source” within 3 to 5 working days of payment.
When filing your ITR, enter the BSR code and challan number from each advance tax payment receipt in the “Tax Payments” section. The system will verify these against your Form 26AS and credit the payment.
Frequently Asked Questions on Advance Tax
Who has to pay advance tax?
Any individual whose estimated tax liability for the financial year exceeds Rs. 10,000 after accounting for TDS must pay advance tax. This includes freelancers, business owners, and salaried professionals with additional income from FD interest, rental income, capital gains, or dividends.
Are salaried employees required to pay advance tax?
Generally no, if salary is the only income and the employer deducts correct TDS. However, if a salaried professional also has FD interest, rental income, or capital gains that result in a net tax liability exceeding Rs. 10,000 beyond what TDS covers, advance tax must be paid on the additional income.
What are the advance tax due dates for FY 2026-27?
June 15, 2026 (15%), September 15, 2026 (45% cumulative), December 15, 2026 (75% cumulative), and March 15, 2027 (100%).
What is the interest penalty for not paying advance tax?
Section 234B charges 1% per month on the shortfall if less than 90% of total tax is paid by March 31. Section 234C charges 1% per month for 3 months if quarterly instalments are missed or insufficient.
Can senior citizens avoid advance tax?
Yes. Senior citizens aged 60 and above with no business or professional income are exempt from advance tax. They pay the full tax at ITR filing time without interest under 234B or 234C.
What assessment year do I select for FY 2026-27 advance tax payment?
Assessment Year 2027-28. For income earned in FY 2026-27 (April 2026 to March 2027), the assessment year is 2027-28. This is the most common mistake when paying advance tax online.
Can I pay advance tax in one lump sum?
Under presumptive taxation (Section 44AD or 44ADA), you can pay 100% by March 15. For all other taxpayers, quarterly instalments are required. However, paying more than required in an earlier instalment reduces the later instalment amounts and helps avoid 234C interest.
What happens if I overpay advance tax?
If your advance tax payments exceed your actual tax liability after all deductions, the excess is refunded when you file your ITR. Ensure your bank account is pre-validated on the income tax portal for faster refund credit.
Key Takeaways
- Advance tax applies if net tax liability after TDS exceeds Rs. 10,000
- Four instalments: June 15, September 15, December 15, March 15
- Senior citizens without business income are exempt
- Interest of 1% per month applies under 234B and 234C for non-payment or late payment
- Select Assessment Year 2027-28 (not 2026-27) when paying advance tax for FY 2026-27
- Save challan receipt with BSR code and serial number for ITR filing
For a complete understanding of income tax including deductions that reduce your advance tax liability, read the tax saving tips for salaried employees guide and the Section 80C deductions guide. And for the complete ITR filing process including where to enter advance tax challan details, read how to file ITR online.
Questions about advance tax calculation for your specific income situation? Drop them in the comments below.
