Advance Tax is more than just a legal requirement – it’s a financial habit that rewards proactive planning and cushions your year-end cash flow.
In India’s “pay-as-you-earn” system, advance tax allows taxpayers to pay income tax in staggered installments during the financial year, rather than as a single payment after 31st March. If your estimated tax liability for the financial year exceeds ₹10,000, you must comply with this rule.
This guide is designed to help you understand who needs to pay, how to calculate your liability, and what happens if you miss a deadline. We also highlight key updates and tax slab changes that affect your payments this year.
Who Needs to Pay Advance Tax?
Under Section 208 of the Income Tax Act, any person whose estimated tax liability for the year exceeds ₹10,000 must pay advance tax. This includes:
Salaried individuals (especially those with rental income, interest, capital gains, or freelance income not fully covered by TDS)
Business owners and professionals
Freelancers and consultants
Presumptive taxation scheme users (Sections 44AD/44ADA)
Exemptions:
Resident senior citizens (60+) who do not earn from business/profession are exempt from advance tax.
However, if such individuals earn business or professional income, they are required to comply.
This provision ensures a broad tax net while offering relief to senior citizens reliant solely on passive income.
Advance Tax Due Dates for FY 2025–26
For most taxpayers, advance tax is split across four installments:
For presumptive taxpayers under Sections 44AD/44ADA, the entire tax liability must be paid in one go by 15 March 2026.
Failing to meet these deadlines invites interest penalties under Sections 234B and 234C, discussed later.
Benefits of Paying Advance Tax on Time
Paying in advance isn't just a formality. It delivers tangible benefits:
Improved cash flow management by spreading payments
Avoidance of last-minute stress during return filing
No interest penalties under Sections 234B & 234C
Increased awareness of your financial health through periodic income estimation
Better budgeting for business owners and professionals
In short, advance tax forces you to stay financially organized - a habit that pays off.
How to Calculate Your Advance Tax for FY 2025–26
Step 1: Estimate Your Total Income
Include income from:
Salary
Rental property
Capital gains
Business or freelancing
Interest from savings, FDs, etc.
Step 2: Choose Your Tax Regime
From FY 2025–26 onwards, the New Tax Regime is the default for individuals, HUFs, AOPs, and BOIs. You may opt for the Old Regime if it suits you better.
New Tax Regime Slabs (FY 2025–26)
New Features:
Section 87A Rebate: Income up to ₹12 lakhs is fully exempt from tax after rebate (raised from ₹7 lakh)
₹75,000 standard deduction for salaried individuals
Deduction for employer's NPS contribution up to 14%
Home loan interest deduction for self-occupied and let-out properties
Step 3: Apply Deductions
Under the New Regime, deductions are limited. If you opt for the Old Regime, you can claim deductions like:
Section 80C (LIC, PPF, ELSS, etc.)
Section 80D (Health insurance)
Section 24(b) (Home loan interest)
Step 4: Apply Rebate and Cess
Section 87A (₹60,000 rebate under new regime)
4% Health & Education Cess
Step 5: Subtract TDS/TCS
Check Form 26AS for tax already deducted. The remaining tax is your advance tax liability.
Illustrative Example: Mr. B (Salaried + Rental + FD)
Gross Income:
Salary: ₹18,00,000
Rental: ₹3,00,000
FD Interest: ₹50,000
Total: ₹21,50,000
Standard Deduction (New Regime): ₹75,000Taxable Income: ₹20,75,000Total Tax + Cess: ₹2,27,500TDS Already Deducted: ₹2,10,000Advance Tax Payable: ₹17,500
Installments:
June 15: ₹2,625
Sept 15: ₹5,250
Dec 15: ₹5,250
Mar 15: ₹4,375
What If You Miss Advance Tax Deadlines?
The tax department charges interest if advance tax is paid late or partially.
Even small delays in earlier quarters can lead to cumulative interest. That’s why timely and accurate payment is essential.
Final Thoughts
Advance tax is not just a statutory obligation - it’s a critical component of your financial hygiene. With tax rules evolving rapidly, especially with the new default regime, planning your income tax isn’t a once-a-year affair anymore. It’s a year-round responsibility.
By estimating your income, tracking your TDS, and using tools like Form 26AS, you’ll not only stay compliant—you’ll stay in control.
Need help with projections, tax regime comparisons, or installment planning?
Fynture, along with our partners, is here to guide you through it - every quarter of the way. Contact our representative now.