The third instalment of advance tax for the current financial year is due on 15 December. This payment is a crucial obligation for many Indian taxpayers, requiring them to pay a portion of their estimated annual tax liability during the year itself, rather than in a lump sum at the time of filing their return.
Who is Liable to Pay Advance Tax?
If your total tax liability for the year, after accounting for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS), exceeds ₹10,000, you are generally required to pay advance tax. This primarily applies to income earned beyond your regular salary.
Key income sources that trigger advance tax liability include:
- Capital gains from the sale of stocks, mutual funds, or property.
- Interest income from fixed deposits, bonds, or savings accounts.
- Dividend income.
- Income from business or profession.
- Income from rent.
Understanding the Payment Schedule and Deadlines
Advance tax is paid in four instalments over the financial year. The deadlines and the cumulative percentage of tax that must be paid by each date are fixed.
The schedule is as follows:
- By 15 June: 15% of the estimated annual tax liability.
- By 15 September: 45% of the estimated tax (cumulative).
- By 15 December: 75% of the estimated tax (cumulative).
- By 15 March: 100% of the estimated annual tax liability.
Prakash Hegde, a chartered accountant based in Bengaluru, clarified a key point for certain incomes. "For capital gains and dividend income, you are not required to pay advance tax until these incomes are actually realised. The liability arises in the quarter in which you earn this income, as estimating it beforehand is often not feasible," he explained.
Exceptions and Penalties for Non-Payment
Senior citizens aged 60 years or above are exempt from paying advance tax, provided they do not have any income from a business or profession. If they run a business or practice a profession, the advance tax rules apply to them as well.
Missing an advance tax instalment deadline attracts an interest penalty under Section 234C of the Income Tax Act. The penalty is 1% simple interest per month on the unpaid amount for a period of three months.
For example, if your first instalment due on 15 June was ₹15,000 and you missed paying it, the interest penalty would be 3% (1% x 3 months) of ₹15,000, which amounts to ₹450. This interest is levied even if you pay the entire due amount in a later instalment.
Therefore, taxpayers with significant non-salary income must carefully estimate their liability and adhere to the quarterly deadlines to avoid last-minute financial strain and unnecessary interest costs. The upcoming 15 December deadline is a critical checkpoint to ensure 75% of your annual tax is already paid to the government.
