New Delhi: The deadline for the third instalment of advance tax for the financial year 2025-26 is just around the corner, December 15. If you miss this crucial date, be prepared for possible interest and penalties under the Income Tax Act, 1961. For those unfamiliar, advance tax is nothing but paying your income tax in parts throughout the year instead of waiting to clear the entire amount while filing your income tax return. Paying on time helps you avoid last-minute stress and financial burden.
How does advance tax work?
Advance tax is mandatory for anyone whose total tax payable for the year after adjusting TDS comes to Rs 10,000 or more. Instead of paying it all at once, the amount is divided into four instalments across the financial year: 15 per cent by June 15, 45 per cent by September 15, 75 per cent by December 15, and 100 per cent by March 15. This means that by the upcoming December 15 deadline, taxpayers should have already paid at least three-quarters of their estimated annual tax.
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This system ensures smoother payments throughout the year and helps avoid a heavy tax load at the end.
Who is required to pay advance tax?
Advance tax isn’t limited to big corporations or high earners, anyone with taxable income not fully covered by TDS must pay it. This includes:
– Salaried individuals who earn extra income through rent, interest, freelance work, or capital gains
– Self-employed professionals such as doctors, lawyers, consultants, CAs, and freelancers
– Business owners and traders, including small and medium businesses
– Investors earning taxable income from stocks, mutual funds, F&O, debt instruments, or crypto
Many salaried people assume that the TDS deducted by their employer takes care of their entire tax liability. But if you earn anything beyond your salary, you are responsible for declaring that income and paying advance tax on it.
Who doesn’t have to pay advance tax?
Not everyone falls under the advance tax requirement. You are exempt if:
– Your total tax payable after TDS deductions is less than Rs 10,000
– You are a resident senior citizen aged 60 or above and do not have any business or professional income
– All your income is already covered by TDS, with no extra earnings that need self-declaration
In these cases, you don’t need to make advance tax payments.
How can you calculate and pay advance tax?
To figure out your advance tax amount you should start by estimating your total income for the financial year. Deduct any eligible tax-saving deductions, apply the relevant income tax slab rates, and calculate your total tax liability. Then subtract the TDS already deducted. If the amount still due is Rs 10,000 or more, you are required to pay advance tax.
Paying is simple and can be done online through Challan 280 on the Income Tax e-filing portal. This helps you stay compliant without any last-minute rush.
Why paying advance tax on time matters
Ignoring advance tax deadlines, especially the December 15 installment can cost you more than you expect. If you miss the date or underpay, you may face interest penalties under Sections 234B and 234C of the Income Tax Act. This can become expensive, particularly for those with fluctuating incomes like freelancers, consultants, and traders.
Paying advance tax on time helps you manage your cash flow better, reduces year-end pressure, and prevents unnecessary penalties. By spreading your tax payments across the year, you avoid last-minute financial stress and stay on the right side of tax compliance.
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