Advance Tax: Who Pays It and How to Calculate
Miss an installment and the interest starts compounding — here's the schedule and the calculation.
Advance tax applies to anyone whose total tax liability for the year exceeds ₹10,000 after TDS — this covers most freelancers, consultants, and business owners, not just large corporations. Salaried individuals are usually exempt since their employer deducts TDS through the year, unless they have significant additional income.
Payment Schedule
- By 15 June — 15% of estimated tax liability
- By 15 September — 45% of estimated tax liability (cumulative)
- By 15 December — 75% of estimated tax liability (cumulative)
- By 15 March — 100% of estimated tax liability (cumulative)
Presumptive Taxation Exception
Taxpayers under presumptive taxation (Section 44AD/44ADA) can pay their entire advance tax liability in a single installment by 15 March instead of following the quarterly schedule — a genuine simplification for small businesses and professionals.
Interest for Shortfall
Sections 234B and 234C impose interest at 1% per month for advance tax shortfall and for missing/underpaying an installment respectively. Because this compounds monthly rather than being a one-time penalty, underestimating income early in the year and correcting it only at filing time is one of the more expensive mistakes a growing business can make.
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