Advance Tax

Tax & Deductions

Advance tax is income tax paid in instalments during the financial year rather than as a lump sum at filing. Mandatory when total tax liability exceeds Rs 10,000 in a year. Salaried employees with only TDS typically do not need advance tax. Self-employed, investors with capital gains, and freelancers usually do.

In detail

Advance tax due dates:nJune 15: 15% of estimated taxnSeptember 15: 45% of estimated tax (cumulative)nDecember 15: 75% of estimated tax (cumulative)nMarch 15: 100% of estimated tax (cumulative)nnPenalty for non-payment: 1% per month interest under Sections 234B and 234C. On a Rs 1L tax liability: 3-month delay costs Rs 3,000 in interest.nnCalculate estimated tax in April-June: salary TDS + investment income + expected capital gains. Pay advance tax if total estimated tax minus TDS > Rs 10,000.

Formula

Advance tax required = Total estimated tax - TDS - TCSnInterest for non-payment: 1% per month on shortfall (Section 234C)

Real-life example

🇮🇳 India example

Priya is a freelancer earning approximately Rs 18L in FY 2024-25. Estimated tax: Rs 3.5L. No employer TDS. She pays: June 15 (Rs 52,500), September 15 (Rs 1,05,000), December 15 (Rs 1,57,500), March 15 (Rs 35,000). Total Rs 3.5L paid in advance. Avoids Rs 10,500 in interest charges she would have faced if paying all at year-end.

Frequently asked questions

Do salaried employees need to pay advance tax? ▼

Usually no -- employer deducts TDS monthly covering the tax. However, if you have additional income (FD interest, capital gains, freelance income, rental income) where TDS is below actual tax, you may need advance tax on that additional income.