Advance Tax: Tax payment in India isn’t just a year-end process. Advance tax is a system in which taxpayers pay taxes in installments based on their estimated income for the year. It applies to individuals whose total tax liability exceeds ₹ 10,000 , whether they are under the old or new tax regime.
This means that if the tax on your income exceeds ₹ 10,000 after deducting TDS and TCS , then you have to pay the entire tax to the government not in one go but in four installments.
Last date for third installment – December 15 , 2025
The third installment of advance tax for the financial year 2025-26 (assessment year 2026-27) is to be deposited by December 15, 2025.
Taxpayers must pay at least 75% of their total tax liability by this time. Failure to do so could result in a notice from the Income Tax Department or interest charges.
Who is required to pay advance tax?
According to tax expert CA Shefali Mundra ( ClearTax ) , every individual , HUF, firm, or company, must pay advance tax if their total annual tax liability exceeds ₹10,000 . However , senior citizens over 60 years of age who do not have income from business or profession are exempt from advance tax .
Avoid these mistakes while filing advance tax
According to CA Mundra, many people make some common mistakes, such as ignoring the Rs 10,000 limit. Assuming that all senior citizens are tax-free. Not including lump-sum income like capital gains, dividends or ESOPs in the tax calculation. Not paying the correct percentage of tax in each installment, especially not paying 75% tax by December 15. Doing so may result in paying interest under Section 234C . Paying tax by entering the wrong assessment year or minor head, which leads to payment mismatch.
Not matching the tax calculations with the information in AIS (Annual Information Statement) , which leads to the mistake of underpaying the tax.
Another mistake occurs when people change jobs during the year and receive two Form 16s . Often, the standard deduction and basic exemption limits are counted twice in both forms , resulting in an undercount of TDS and a subsequent tax liability.
What happens if taxes are not paid on time?
CA Mundra explains that late payment of advance tax does not incur a penalty, but rather interest . Under Section 234C, if the installment is not paid by the due date, interest is charged at the rate of 1% per month . If less than 90% of the total advance tax is deposited by the end of the year, 1% monthly interest is also payable under Section 234B .
However, if someone unexpectedly earns additional income, such as capital gains, they can pay the tax in the next installment or by March 31. In this case, interest will not be charged, provided the tax is paid within the stipulated time limit.
