Advance Tax: Due Dates, Who Has to Pay It, and How Sections 234B and 234C Interest Work

Advance tax is the rule that income tax is paid as you earn, not in a lump sum the following July. Salaried people mostly meet it without noticing, because TDS does the job. Everyone else - freelancers, landlords, investors with large capital gains or interest, and salaried people with a side income - has to pay it themselves in instalments, and the penalty for not doing so is interest at 1% a month, which does not sound like much until it is charged for a year on a six-figure sum. This guide sets out who must pay, when, how much, and exactly how the two interest sections work.

Who has to pay advance tax

Under Section 208, you must pay advance tax if your estimated tax for the year, after subtracting TDS and TCS, is ₹10,000 or more. The test is on the net figure, so:

• A salaried employee whose employer deducts the right TDS owes nothing extra and is out of scope - even at a ₹50 lakh salary.
• The same employee with ₹3 lakh of FD interest on which the bank deducted 10% TDS may owe more: at the 30% band the tax on that interest is ₹93,600, the bank withheld ₹30,000, and the ₹63,600 gap exceeds ₹10,000. Advance tax is due - or they can declare the interest to their employer so it is TDS-ed with salary.
• A freelancer billing ₹20 lakh with clients deducting 10% under 194J has ₹2 lakh of TDS against a likely tax of about ₹1 lakh under 44ADA - probably nothing to pay, and a refund due.
• An investor who books ₹10 lakh of equity LTCG in a year owes ₹1,09,375 plus cess on it with no TDS at all - advance tax is squarely due.

Exempt: resident senior citizens (60 and above) who have no income from business or profession, under Section 207(2). A retiree living on pension, interest and capital gains never pays advance tax, however large the sum; they pay with the return.

The instalment schedule

The instalments are cumulative percentages of the year's estimated tax, and the dates are the same every year:

Presumptive taxpayers under Section 44AD or 44ADA have a single instalment: 100% by 15 March. This is one of the quieter benefits of the presumptive schemes - no quarterly estimating.

Anything paid after 15 March but before 31 March is still "advance tax" for the purpose of the 234B 90% test, but it does not undo the 234C interest for the instalments already missed. Payment after 31 March is self-assessment tax.

How to estimate the amount each quarter

The law expects a reasonable estimate, not clairvoyance. A practical method:

1. In June, project the year's income from each source - salary from the offer letter, interest from deposit statements, rent from the agreement, freelance receipts from the pipeline. Ignore capital gains you have not yet booked.
2. Run the total through the calculator for your regime to get the year's tax. Subtract the TDS you expect (salary TDS from payroll, 10% on interest above the bank threshold, 10% on professional fees).
3. If the result is ₹10,000 or more, pay 15% of it by 15 June, and revise the estimate each quarter with actual figures.
4. When a capital gain lands mid-year, add the tax on it to the next instalment. Section 234C specifically forgives a shortfall caused by capital gains, dividends, lottery winnings or a new business, as long as the tax on that income is paid in the instalments that fall after it arose.

Over-estimating is harmless: excess advance tax is refunded with interest under Section 244A. Under-estimating is what the two interest sections punish.

Section 234C: interest for missing or short-paying an instalment

234C looks at each instalment separately. If the cumulative amount paid by a due date is less than the required percentage, simple interest of 1% per month for three months is charged on the shortfall (one month for the 15 March instalment). There is a tolerance: no interest for the June instalment if at least 12% was paid, and none for September if at least 36% was paid.

Example. Tax for the year after TDS is ₹1,20,000. You pay nothing in June and September, ₹90,000 in December and the balance in March:

Small, but it scales: the same pattern on ₹12 lakh of tax costs ₹21,600. For presumptive taxpayers, 234C applies only if the 15 March payment falls short, at 1% for one month.

Section 234B: interest for paying less than 90% by 31 March

234B looks at the year as a whole. If the advance tax you paid by 31 March is less than 90% of your final assessed tax (after TDS), simple interest of 1% per month runs on the whole shortfall from 1 April until the date you pay it - usually the date you file. A part of a month counts as a full month.

Example. Final tax after TDS ₹2,00,000; advance tax paid ₹1,00,000 (50%, below the 90% line); return filed and balance paid on 25 July:

• Shortfall = ₹2,00,000 − ₹1,00,000 = ₹1,00,000
• Months from 1 April to 25 July = 4 (April, May, June, and part of July)
• Interest = ₹1,00,000 × 1% × 4 = ₹4,000

Both sections can apply to the same year - 234C for the quarterly pattern, 234B for the overall shortfall - and both are computed automatically by the ITR utility when you file. The department's intimation under 143(1) will add them if you did not.

How to pay advance tax online

1. Go to the e-filing portal (incometax.gov.in) → e-Pay Tax. You can pay without logging in using your PAN and mobile OTP.
2. Choose Income Tax (Minor head 100 - Advance Tax) and the assessment year - for FY 2026-27 that is AY 2027-28. Selecting the wrong AY is the most common mistake and takes a rectification request to fix.
3. Enter the amount under "Tax"; leave surcharge and cess blank unless you are computing them separately (the total is what matters).
4. Pay by net banking, UPI, debit card or at a bank counter. Save the challan (CRN and BSR code) - the payment appears in Form 26AS within a few days, and the ITR utility pre-fills it.

Nothing else is needed: there is no form to file with an advance-tax payment. Your quarterly estimates are your own business unless the department asks.

Frequently asked questions