Taxpayers should note that the final installment of advance tax for the financial year 2025–26 must be paid by March 15, 2025.
Missing this deadline can lead to penalty interest under the Income Tax Act, 1961.
Advance tax is an important part of India’s tax system and applies to individuals who earn income beyond their regular salary.
What Is Advance Tax?
Advance tax is often called the “earn and pay” tax system.
Instead of paying the entire tax amount at the end of the year, taxpayers pay it in installments during the financial year.
This type of tax mainly applies to income sources such as:
Rental income
Capital gains from property or the stock market
Business income
Freelancing or professional income
In simple terms, if you earn income that does not have TDS (Tax Deducted at Source) deducted, you may need to pay advance tax.
Advance Tax Payment Schedule
Advance tax is paid in four installments during the year.
Here is the usual payment schedule:
June 15: Pay 15% of the total tax liability
September 15: Pay 45% of the total tax (including the first installment)
December 15: Pay 75% of the total tax
March 15: Pay the remaining amount to complete 100% of the tax liability
The March 15 payment is the final installment, and taxpayers must ensure the full tax amount is paid by this date.
Who Needs to Pay Advance Tax?
Under Section 208 of the Income Tax Act, 1961, advance tax must be paid by taxpayers whose estimated tax liability is Rs 10,000 or more in a financial year, after adjusting TDS.
This often includes:
Business owners
Freelancers
Doctors, lawyers, and consultants
Investors earning capital gains
Individuals earning rental income
If you only earn salary and your employer deducts TDS, you usually do not need to pay advance tax.
However, if you have additional income sources apart from your salary, advance tax may still apply.
Who Is Exempt From Advance Tax?
Certain taxpayers are exempt from paying advance tax.
A resident senior citizen aged 60 years or above does not need to pay advance tax if they do not have business or professional income during the financial year.
This exemption helps retired individuals who depend mainly on pension or savings income.
Penalties for Missing the Deadline
Advance tax can be paid online or offline, but failing to pay it on time can lead to penalty interest.
Under Sections 234B and 234C of the Income Tax Act, 1961, taxpayers may have to pay 1% interest per month or part of a month.
Section 234B applies when there is a delay or short payment of advance tax.
Section 234C applies when a taxpayer fails to pay one or more installments on time.
To avoid penalties, taxpayers should ensure that their final advance tax payment is completed before the March 15 deadline.
