Indian taxpayers with a significant estimated tax bill for the financial year must be aware of the mandatory advance tax payment schedule. As per the Income Tax Act, 1961, if your net income-tax liability after adjusting for Tax Deducted at Source (TDS) exceeds Rs 10,000 in a financial year, you are obligated to pay your tax in advance through quarterly installments. This rule is designed to ensure a steady flow of revenue to the government and prevent a large year-end tax burden for individuals.
Key Exemptions: Who Does Not Need to Pay Advance Tax?
The law provides important relief for specific categories of taxpayers. Resident senior citizens aged 60 and above are fully exempt from paying advance tax if they do not have any income from a business or profession. This exemption, highlighted by Chartered Accountant Bharat D Sarawgee of NRI Nivesh, applies even if their total tax liability crosses the Rs 10,000 threshold.
Similarly, salaried individuals are also exempt, provided their entire tax liability is met through TDS deductions from their salary and they have no other source of taxable income. This simplifies tax compliance for a large section of the workforce.
Payment Schedule and Special Income Categories
For the financial year 2025-26 (Assessment Year 2026-27), the advance tax must be paid in four installments on specific due dates. The deadlines and the cumulative percentage of tax payable are as follows:
- On or before June 15: 15% of the net estimated tax liability.
- On or before September 15: 45% (minus tax already paid).
- On or before December 15: 75% (minus tax already paid).
- On or before March 15: 100% (minus tax already paid).
Taxpayers opting for the presumptive taxation scheme under sections 44AD or 44ADA enjoy a concession; they can make a single consolidated advance tax payment by March 15.
Income with Uncertain Timing: Flexibility in Payment
A crucial provision protects taxpayers from penal interest on income that is difficult to estimate in advance. Chartered Accountant Manas Chugh, Head of Regulatory Services at Osgan Consultants, explains that for certain incomes, advance tax can be paid in the quarter immediately following the one in which the income is actually earned.
This applies to specific income categories as per the first proviso of Section 234C(1):
- Capital gains (e.g., from the sale of listed equity shares).
- Winnings from lotteries, crossword puzzles, horse races, card games, or other similar games.
- Income from business or profession when such income arises for the first time.
- Dividend income (excluding deemed dividends under Section 2(22)(e)).
This rule shields taxpayers from interest penalties when precise calculation of liability is not feasible before the income is actually realized.
Consequences of Non-Compliance
Failing to pay advance tax, or underpaying it according to the prescribed schedule, can attract penal interest under Sections 234B and 234C of the Income Tax Act. Therefore, it is critical for eligible taxpayers, especially those with substantial income from business, profession, or investments, to estimate their annual tax liability accurately and adhere to the quarterly payment deadlines. Remember, the Rs 10,000 threshold is based on your net tax liability after accounting for all TDS; if it is below this amount, advance tax is not mandatory.
