Understanding Advance Tax — Who Pays and When
If your tax liability is large, you must pay it through the year, not just at filing. Here’s how advance tax works.
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Advance tax is income tax paid as you earn through the year, rather than in one lump at filing time. If your total tax liability for the year exceeds a threshold (after TDS), you’re required to pay it in instalments — and missing them attracts interest. This is general education, not tax advice.
Who has to pay it
Anyone whose net tax liability for the year is above the specified limit (commonly ₹10,000) after accounting for TDS. This often catches:
- Investors/traders with significant capital gains, dividend or interest income where little/no TDS was deducted.
- Freelancers and business owners without salary TDS.
- Salaried people with large side income beyond what their employer deducts.
(Senior citizens without business income are generally exempt from advance tax.)
The instalment schedule
Advance tax is paid in four instalments through the financial year (by mid-June, mid-September, mid-December and mid-March), each covering a cumulative percentage of your estimated liability.
Why it matters
- Interest for non-payment — under Sections 234B/234C, you pay interest if you underpay or miss instalments.
- Capital gains are tricky — since gains can’t be predicted, you pay advance tax on them in the instalment after they arise.
Practical tips
- Estimate your annual income including gains, and track it through the year.
- Pay online via the income-tax portal; keep challans.
- Reconcile with your AIS/Form 26AS at year-end.
If you have meaningful investment income, advance tax likely applies to you. Consult a tax professional. Education only, not tax advice.
