Advance tax is income tax paid as you earn, not after the year ends. If your estimated tax for the year – after TDS and TCS – is Rs. 10,000 or more, the law requires you to pay it in four instalments through the year. Miss or underpay an instalment and interest meters start running at 1% a month. Here is the complete FY 2026-27 guide: who must pay, the due dates, how to estimate, and exactly how the two interest charges (the ones practitioners still call 234B and 234C) are computed.
Who must pay advance tax – and who is exempt
- Everyone – individual, firm, LLP, company – whose estimated tax liability for the year, net of TDS/TCS, is Rs. 10,000 or more.
- Salaried employees are usually covered by employer TDS, but capital gains, interest on deposits, rent or freelance income on the side routinely pushes them over the Rs. 10,000 line.
- Exempt: resident senior citizens (60+) who have no business or professional income – they can pay everything as self-assessment tax with no advance-tax interest.
- Presumptive taxpayers (the old 44AD/44ADA schemes) get a concession: a single instalment of 100% by 15 March instead of four.
Due dates and cumulative percentages – FY 2026-27
| Due date | Cumulative advance tax payable |
|---|---|
| 15 June 2026 | 15% of the year’s estimated tax |
| 15 September 2026 | 45% |
| 15 December 2026 | 75% |
| 15 March 2027 | 100% |
| 15 March 2027 (presumptive 44AD/44ADA) | 100% in one shot |
How to estimate – a 4-step method
- Project the year’s income head-wise: salary, business/professional profit, interest, rent, dividends and any capital gains already booked.
- Apply your regime’s slabs plus surcharge and 4% cess to the projected total (our Income Tax Calculator does both regimes side by side).
- Subtract TDS/TCS you expect for the year (check Form 26AS / AIS for the run rate).
- The balance is your advance tax; pay the cumulative percentage each quarter and re-estimate every instalment – the law expects updated estimates, not a frozen April guess.
The two interest meters, decoded
Interest for deferring instalments (the old Section 234C)
Charged at 1% per month for 3 months on the shortfall in each of the first three instalments, and 1% for one month on the March shortfall – computed on the returned income. One saving grace: shortfalls caused by income that was impossible to estimate in advance – capital gains booked later in the year, dividend income, winnings – attract no interest if you pay the tax in the instalment immediately after the income arises.
Interest for overall shortfall (the old Section 234B)
If your advance tax plus TDS comes to less than 90% of the final assessed tax, interest runs at 1% per simple month from 1 April of the assessment year until you actually pay – on top of 234C. This is the expensive one on large unpaid balances.
Worked example
Estimated tax for FY 2026-27 after TDS: Rs. 2,00,000. The taxpayer pays nothing until 10 December, then Rs. 1,50,000, and the balance Rs. 50,000 on 20 March.
| Instalment | Required (cumulative) | Paid (cumulative) | Shortfall | Interest |
|---|---|---|---|---|
| 15 Jun | 30,000 | 0 | 30,000 | 30,000 x 1% x 3 = 900 |
| 15 Sep | 90,000 | 0 | 90,000 | 90,000 x 1% x 3 = 2,700 |
| 15 Dec | 1,50,000 | 1,50,000 (paid 10 Dec) | Nil | Nil |
| 15 Mar | 2,00,000 | 1,50,000 | 50,000 | 50,000 x 1% x 1 = 500 |
Deferment interest: Rs. 4,100. Since 100% was paid by 31 March (more than 90%), no further 1%-per-month meter runs from April. Had the Rs. 50,000 been paid only with the return in July, roughly four more months of interest would have applied on it.
Compute your instalments and interest in one go
Enter your estimated income and TDS – due-date amounts, 234B and 234C interest are worked out automatically.
Open Advance Tax CalculatorFrequently Asked Questions
I am salaried with only salary income – do I need to pay advance tax?
Normally no – employer TDS spread over the year satisfies the requirement. The trouble starts with other income: capital gains, FD interest beyond the TDS threshold, rent. Re-check whenever you book a large gain.
I sold shares in February – am I liable for interest on all four instalments?
No. For income that could not have been estimated earlier (capital gains, dividends), interest is avoided if you pay the tax on it with the instalment due immediately after the sale – here, 15 March.
Is the interest different under the Income-tax Act 2025?
The provisions are renumbered under the 2025 Act (in force from 1 April 2026) but the mechanics – the instalment schedule, 1% per month, the 90% test – continue unchanged. Practitioners still refer to them by the familiar 234B/234C labels.
What happens if I overpay?
The excess comes back as a refund with interest under the refund provisions (the old 244A) – generally 0.5% per month. Parking some buffer beats underpaying, but a precise estimate beats both.
Does paying on 31 March instead of 15 March help?
Partly. You still owe one month’s interest on the March shortfall, but the payment counts as advance tax – keeping you above the 90% line and stopping the bigger from-April meter.