Understanding Advance Tax Liability & Quarterly Due Dates
Advance Tax (also known as the "Pay-As-You-Earn" tax scheme) is the system under which tax on income earned during a financial year is paid in quarterly installments during the same financial year, rather than as a single lumpsum payment at the time of filing annual ITR returns.
Under Section 208 of the Income Tax Act, every taxpayer—whether salaried employee, freelancer, independent consultant, business owner, or trader—whose estimated net tax liability for the financial year (after deducting TDS/TCS) is ₹10,000 or more is legally mandated to pay advance tax.
Quarterly Advance Tax Installment Schedule
| Installment Number | Due Date (Financial Year) | Minimum Cumulative Payment | Applicable Taxpayers |
|---|---|---|---|
| 1st Installment | On or before 15th June | 15% of Net Tax | All Individual Taxpayers & Corporates |
| 2nd Installment | On or before 15th September | 45% of Net Tax | All Individual Taxpayers & Corporates |
| 3rd Installment | On or before 15th December | 75% of Net Tax | All Individual Taxpayers & Corporates |
| 4th Installment | On or before 15th March | 100% of Net Tax | All Individual Taxpayers & Sec 44ADA Presumptive Taxpayers |
Freelancers & Section 44ADA Presumptive Tax Exemption
Under Section 44ADA of the Income Tax Act, eligible professionals (software consultants, doctors, lawyers, designers, technical freelancers) with annual gross receipts up to ₹75,000,000 (75 Lakhs, subject to 95% digital receipts condition) can declare 50% of their gross receipts as taxable profit without maintaining detailed books of accounts.
Special Section 44ADA Advance Tax Advantage
Taxpayers opting for Section 44ADA are exempt from June, September, and December quarterly installments! They are legally permitted to pay 100% of their advance tax in a single payment on or before 15th March without incurring Section 234C interest penalties.
Interest Penalties for Non-Payment (Section 234C & 234B)
Failing to pay advance tax installments on time attracts mandatory interest penalties:
- Section 234C (Deferment Penalty): Simple interest calculated at 1% per month for a 3-month period on the shortfall amount below the mandatory quarterly thresholds (15%, 45%, 75%, 100%).
- Section 234B (Default Penalty): Simple interest calculated at 1% per month from 1st April of the Assessment Year until the date of filing ITR if total advance tax paid before 31st March is less than 90% of assessed tax.
Senior Citizen Exemption Rules
Under Section 207, resident senior citizens (aged 60 years or above) who do not possess any income from Business or Profession (PGBP) are completely exempt from advance tax payment obligations. They can pay their tax balance at the time of filing annual ITR without Section 234B/234C interest.
Frequently Asked Questions (FAQ)
Do salaried employees need to pay advance tax?
Usually no, because employers deduct monthly TDS under Section 192. However, if a salaried employee has significant side income (such as stock trading profits, rental income, high savings bank interest, or freelancing) where TDS was not deducted, and net tax exceeds ₹10,000, they must pay advance tax.
How do I pay Advance Tax online in India?
Advance tax can be paid directly online through the Income Tax e-filing portal (e-Pay Tax) using Challan ITNS 280, selecting tax head '(100) Advance Tax' via UPI, Net Banking, or Credit Card.