Advance Tax Computation — Post-Registration Compliance Guide
Advance tax is a critical compliance obligation for individuals and businesses in India whose total income exceeds ₹10,000 from other sources. Failure to pay advance tax results in interest charges under Section 234B or 234C of the Income Tax Act, which can significantly impact cash flow. This guide outlines the specific due dates, calculation methods, and penalties applicable for the Financial Year ending March 2026.
Before you start
- Registration with PAN (mandatory)
- Completion of ITR-4 or ITR-3/ITR-5 as per business structure
- Access to Form 13 available on e-filing portal for payment
Step-by-step
Estimate Tax Liability
Calculate your total expected tax liability before deducting TDS and other deductions. Subtract any advance tax already paid via challan or deducted at source to determine the remaining balance payable in instalments.
Pay First Instalment by June 15
The first payment must be made on or before June 15 of the assessment year. This covers approximately 15% of your total tax liability for that financial year, ensuring you avoid immediate interest penalties.
Pay Second Instalment by September 15
By this due date, you must have paid at least 45% of the total estimated tax. This is a critical checkpoint for most businesses as they finalize their Q2 financial results.
Pay Third Instalment by December 15
Ensure that cumulative payments reach 75% of your liability before this date. Missing this deadline often triggers the penalty under Section 234C for delayed payment beyond statutory timelines.
Pay Fourth Instalment by March 15
The final instalment covers up to 90% of your tax liability. The remaining balance, if any, must be paid via Self-Assessment Tax before filing the return on July 31.
File Challan ITNS-28
Use Form No. 28 (Challan) to make payments through authorized banks or online portals like NSDL/Centralized Portal. Ensure the correct assessment year and due date are selected in the challan.
Verify Payment Status
After payment, verify that the credit has appeared in your Form 26AS within a few days. This is essential for accurate filing of Income Tax Returns to avoid discrepancies during assessment.
Common mistakes to avoid
- Ignoring TDS credits while calculating advance tax liability.
- Failing to pay the minimum required percentage (15%, 45%, etc.) on specific dates.
- Not updating estimated income if business projections change mid-year.
Frequently asked questions
What happens if I miss a due date?
You will be liable to pay interest under Section 234C, calculated at the rate of 1% per month or part thereof on the unpaid amount.
Is advance tax mandatory for all businesses?
It is only mandatory if your total income exceeds ₹10,000 from other sources and you have a net tax liability. Sole proprietors with negligible turnover may be exempt.
Can I pay the full amount in one go?
Yes, you can choose to pay your entire estimated tax liability as Self-Assessment Tax before filing returns or via advance tax challans if preferred for cash flow management.
How is TDS treated against Advance Tax?
TDS deducted on payments like salaries, professional fees, and contractor bills are considered 'advance paid' towards your total tax liability. You must ensure these credits reflect in Form 26AS.
What is the penalty for underestimating income?
If you underestimate income leading to non-payment of advance tax, interest charges apply. Additionally, if your actual return shows higher liability than estimated, additional self-assessment tax must be paid.
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