Who is required to pay advance tax in India?

Under section 208 of the Income-tax Act 1961, every assessee whose estimated tax liability for the financial year (after TDS and TCS) is ₹10,000 or more is required to pay advance tax. The obligation applies to individuals, firms, LLPs, companies, and trusts. Senior citizens (aged 60 or above) who do not have income from business or profession are exempted from advance tax. Resident senior citizens with only pension, interest and rental income can therefore wait until the self-assessment tax payment at the time of filing the return.

What are the four advance tax instalment dates for FY 2026-27?

Section 211 of the Income-tax Act 1961 prescribes four instalments for all assessees other than those under presumptive taxation. The first instalment, due 15 June 2026, requires payment of 15 per cent of the estimated annual advance tax liability. The second instalment, due 15 September 2026, requires cumulative payment of 45 per cent. The third instalment, due 15 December 2026, requires cumulative payment of 75 per cent. The fourth and final instalment, due 15 March 2027, requires cumulative payment of 100 per cent. For assessees opting in to presumptive taxation under section 44AD or 44ADA, the entire advance tax can be paid in a single instalment by 15 March 2027.

How is interest under section 234C calculated when an instalment is missed?

Section 234C imposes interest for deferment of advance tax instalments. The interest is calculated at one per cent per month, simple interest, for three months on the shortfall from each of the first three instalments, and one per cent for one month on the shortfall from the fourth instalment. The shortfall is the difference between the cumulative percentage required and the amount actually paid by that due date. The interest is not a penalty and cannot be waived; the only relief is the threshold tolerance of having paid at least 12 per cent by 15 June and 36 per cent by 15 September, which respectively avoids the 15 per cent and 45 per cent triggers for those two instalments.

How should advance tax be estimated when the current year is uncertain?

The Income-tax Act does not prescribe a single estimation method. The practical approach for the first instalment, when only ten weeks of the financial year have elapsed, is the safer of two anchors. Anchor one is the previous year's actual tax liability, annualised. Anchor two is the actual income visible in the year so far, extrapolated to twelve months. We recommend using the higher of the two for the 15 June payment because the cost of overpayment is recoverable as a refund, while the cost of underpayment is the 234C interest at twelve per cent per annum equivalent. The estimate is refined at each subsequent instalment as more of the year's actual numbers become available.

What is the difference between section 234B and section 234C interest?

Section 234B and section 234C both impose interest related to advance tax, but for different defaults. Section 234C is the deferment interest, applicable when an instalment was paid late or short during the year. Section 234B is the shortfall interest, applicable when the total advance tax paid for the year was less than ninety per cent of the assessed tax. Section 234B interest runs at one per cent per month from 1 April of the assessment year until the date the self-assessment tax is paid. The two are cumulative: a taxpayer who underpays during the year owes both 234C for the deferment and 234B for the shortfall.

Advance tax Q1 FY 2026-27: the 15 June deadline, the 15 per cent slab, and the interest cost of skipping it

The advance tax calendar is one of those quiet compliance items where the cost of a miss is small per instalment but compounds across the year. The first instalment of FY 2026-27 is due 15 June 2026, 15 per cent of the estimated annual tax liability. For most of our growing business clients, this is the instalment that gets missed most often because Q1 books are not closed yet and the temptation is to wait until the September instalment when there is more visibility. The 234C interest cost of that wait is small in absolute terms but persistent, and the late-payment habit has a way of repeating across the four instalments.

This post covers what the law actually requires, how to estimate when the books are not ready, the interest exposure under section 234C and section 234B, the businesses that are most often caught out, and the practical challan ITNS 280 process.

What section 211 actually says

Section 211 of the Income-tax Act 1961 prescribes the four-instalment schedule for assessees other than those under presumptive taxation. The required cumulative percentages are 15 per cent by 15 June, 45 per cent by 15 September, 75 per cent by 15 December, and 100 per cent by 15 March. The percentages are cumulative, not incremental, so a taxpayer who pays the full 100 per cent in March alone has technically missed all four deadlines.

The obligation under section 208 is triggered when the estimated tax liability for the year, after credit for TDS and TCS, is ₹10,000 or more. The threshold is low enough that almost every salaried individual with side income, every LLP, every company, and every freelancer with annual receipts above the GST threshold falls into the net.

The exemption for senior citizens under section 207(2) is narrow. It applies only to resident individuals aged 60 or above who do not have income from business or profession. A retired bank officer with pension, FD interest and rental income is exempt; the same retired officer who consults part-time for his former employer is not.

The 15 per cent on what number

The 15 per cent in section 211 is 15 per cent of the estimated annual tax liability, not 15 per cent of the income earned in Q1. This is the single most common point of confusion. A business that earned ₹2 crore in Q1 but expects ₹8 crore for the full year owes 15 per cent on the full-year tax estimate, not 25 per cent on the Q1-and-only-Q1 estimate.

The annual tax estimate has three components: the tax on estimated total income at the applicable slab or rate, the surcharge if applicable, and the health-and-education cess at 4 per cent on tax plus surcharge. From the gross figure, credit is taken for TDS already deducted by the payer, TCS already collected, and any tax already paid as advance tax in earlier instalments of the same year.

For a private limited company taxed at 22 per cent under section 115BAA, the calculation is straightforward: estimated taxable profit times 22 per cent, plus 10 per cent surcharge if income exceeds ₹10 crore, plus 4 per cent cess. For an individual in the new regime under section 115BAC, the slabs apply with the ₹3 lakh threshold and the marginal rates from 5 to 30 per cent.

How to estimate the year when only Q1 is visible

The honest answer is that no estimation method is perfect in May. The two anchors we use are:

Anchor one: last year's actuals, annualised. Take the previous year's assessed tax liability and adjust for the changes you can already see. If your previous year was ₹1 crore tax and you have started the new year with the same client base and the same headcount, the anchor is ₹1 crore plus an inflation adjustment of around 6 to 8 per cent.

Anchor two: this year's run-rate, extrapolated. Take the income visible in April and May and multiply by twelve over two to get a full-year estimate. This is less reliable for businesses with seasonality (festive Q3 retail, Q4 audit firms) but useful for steady-state services businesses.

The pragmatic choice is the higher of the two for the 15 June instalment. The reasoning is asymmetric risk. Overpaying generates a refund that will be credited at six per cent per annum interest under section 244A. Underpaying generates a 234C deferment interest at one per cent per month, which is twelve per cent annualised. The cost of being conservative is roughly half the cost of being aggressive.

The 234C deferment interest, illustrated

A simple example. Estimated annual advance tax liability for a company is ₹50 lakh. The 15 June instalment requires 15 per cent, or ₹7.5 lakh. The company pays only ₹4 lakh on 15 June and the balance ₹3.5 lakh on 15 September together with the second instalment.

The shortfall on 15 June is ₹3.5 lakh. Section 234C charges interest at one per cent per month for three months on this shortfall, which works out to ₹10,500. The cost is not catastrophic in absolute terms but is recurring: a company that underpays each of the first three instalments by the same proportion accumulates ₹30,000 to ₹40,000 of pointless interest by year-end on a ₹50 lakh annual liability.

There is one safe-harbour provision worth knowing. If the taxpayer has paid at least 12 per cent of the estimated liability by 15 June, the 15 per cent shortfall trigger is not crossed and no 234C interest is charged for that instalment. The same tolerance applies at 15 September, where 36 per cent paid is treated as 45 per cent for shortfall purposes. The 15 December and 15 March instalments do not have this tolerance.

The 234B shortfall interest

Section 234B is a separate interest charge that catches the assessee at the end of the year. It applies when the total advance tax actually paid is less than 90 per cent of the assessed tax. The interest runs at one per cent per month from 1 April of the assessment year until the date the balance self-assessment tax is paid.

A taxpayer who underestimates the annual liability and pays only 70 per cent through the four instalments owes 234B interest from April onwards on the 30 per cent gap. If the return is filed and the balance paid only in October, the 234B interest accumulates for six months, costing six per cent of the gap. This is in addition to any 234C deferment interest already accumulated during the year.

The two interest charges together are why we tell new clients that the annoyance of paying advance tax on uncertain numbers is preferable to the certainty of paying interest on those same numbers later.

The businesses that most often miss the 15 June deadline

In our practice, four categories of business consistently miss the first instalment.

Newly incorporated companies in their first FY. Founders are heads-down on product and revenue; advance tax is not yet a habit. The first year typically has lower income and so a smaller absolute exposure, but the 234C interest still applies if the threshold is crossed.

Service businesses with lumpy invoicing. A consulting firm that bills 60 per cent of its annual revenue in Q3 and Q4 will look like a small earner in May. The temptation to estimate low is strong; the actual year-end profit then exceeds the estimate substantially.

Freelancers and professionals who recently crossed the GST threshold. Section 234C does not care that you crossed ₹20 lakh aggregate turnover only in March of the previous year. The first full year of advance tax obligations starts immediately.

Promoters who declared a one-off dividend or capital gain in the previous year. The previous year's tax becomes the anchor, but the one-off income may not recur. Using last year's number unadjusted leads to overpayment; ignoring it leads to underpayment. A reasonable adjustment, with documentation, is the answer.

How to actually pay, the ITNS 280 process

Advance tax is paid using challan ITNS 280 on the e-pay portal at incometax.gov.in. The relevant fields are:

Tax applicable. Code (0021) for individuals and HUFs, code (0020) for companies.
Type of payment. Select "(100) Advance Tax". Do not select "(300) Self-Assessment Tax", which is for tax paid at the time of filing the return.
Assessment Year. For FY 2026-27, the assessment year is AY 2027-28.
PAN. As registered.
Amount. The instalment amount as estimated.
Payment mode. Net banking, debit card, UPI, RTGS, NEFT, or over-the-counter at an authorised bank branch.

The challan receipt with the BSR code, challan serial number, and date should be saved. These three pieces of data are needed at the time of filing the ITR to claim credit for the payment in the return.

What to do this week

For most of our business clients, the workflow is the same: pull last year's assessed tax, look at the year-to-date P&L through April, take the higher of the two annualised numbers, multiply by 15 per cent, pay by 15 June. Document the estimate in a one-page memo so that the same logic is available when the second instalment is due in September.

For uncertain estimates, err on the side of paying slightly more than required. A ₹50,000 overpayment refunded in October at 6 per cent interest costs nothing; a ₹50,000 underpayment costs ₹500 per month in 234C interest and erodes the predictability that is the point of having an advance-tax calendar in the first place.

If you have not paid advance tax before and are unsure whether you cross the ₹10,000 threshold, the simplest test is: take your expected annual income, subtract eligible deductions, calculate the tax at your applicable slab, subtract estimated TDS, and see if the residual is ₹10,000 or more. If yes, the calendar applies and 15 June is the date to start.

Common compliance questions we field in May

A few quick clarifications that come up most years.

Is GST output tax part of advance tax? No. Advance tax under the Income-tax Act is for direct tax (income tax). GST is paid separately on its own calendar under section 39 of the CGST Act 2017, monthly or quarterly depending on the QRMP election.

Can advance tax be revised downward if Q1 turns out weaker than expected? Yes. The 15 September instalment requires cumulative payment of 45 per cent based on the then-current estimate of the year. If the year is now expected to be lower, the September instalment is recalculated on the revised number. The June instalment, however, is final once paid.

What happens if I pay advance tax and then have a loss for the year? The advance tax becomes a refundable balance. The return for the year is filed with the loss and the refund is processed.

Can advance tax be paid in cash? Only up to ₹10,000 per challan, per the cash-payment limit. For larger amounts, the bank will require a cheque, demand draft, or electronic transfer.

The 15 June deadline is fourteen working days away from the publication date of this post. The annoying truth is that the time saved by skipping the calculation is consumed several times over by year-end clean-up and interest computation. We file the first instalments for our retainer clients in the first week of June for exactly this reason.