India’s taxation system is structured to ensure a steady inflow of revenue that supports the nation’s development goals. Among the many mechanisms in place, Advance Tax—often called the “Pay-As-You-Earn” system—plays a crucial role in ensuring timely tax collection.
- What is Advance Tax?
Advance Tax is the system of paying your income tax liability in installments during the financial year, instead of paying it all at once at the end.
If your total tax liability for a year exceeds ₹10,000, you are required to pay advance tax as per the due dates prescribed under the Income Tax Act.
The primary purpose is simple:
- Ensure a regular inflow of revenue for the government.
- Avoid burdening taxpayers with a lump-sum payment at year-end.
- Promote better financial discipline among individuals and businesses.
- Who Needs to Pay Advance Tax?
Advance tax applies to:
- Self-employed professionals (doctors, lawyers, freelancers, consultants, etc.)
- Business owners
- Salaried individuals (if they have significant income other than salary, such as rental income, capital gains, or interest)
- Companies and partnership firms
Note: Salaried employees usually have TDS (Tax Deducted at Source) deducted by their employer. However, if they earn additional income beyond salary, they may still be liable to pay advance tax.
- Advance Tax Due Dates
Advance tax is paid in four installments across the financial year. The due dates are as follows:
| Due Date | % of Total Tax Payable |
|---|---|
| 15th June | At least 15% |
| 15th September | At least 45% |
| 15th December | At least 75% |
| 15th March | 100% |
For taxpayers opting for the presumptive income scheme (Section 44AD/44ADA), the entire tax liability must be paid in a single installment on or before 15th March.
- How to Calculate Advance Tax?
- Estimate annual income from all sources (salary, business/profession, capital gains, rental, etc.).
- Apply eligible deductions (Sections 80C, 80D, etc.).
- Compute tax liability using applicable income tax slabs.
- Deduct TDS already deducted (if any).
- If the net tax liability exceeds ₹10,000 → pay advance tax as per schedule.
- Consequences of Not Paying Advance Tax
If you fail to pay advance tax or pay less than the required amount, you may face:
- Interest under Section 234B → for default in payment.
- Interest under Section 234C → for deferment of installments.
This means non-compliance can make your tax liability higher than expected.
- Role of Tax Professionals
Calculating advance tax requires accurate income estimation and planning. Many taxpayers seek guidance from chartered accountants and financial advisors to:
- Avoid penalties
- Optimize tax savings
- Ensure timely compliance
Their expertise helps taxpayers meet their obligations while staying within the legal framework.
- Conclusion
Advance Tax is not just a legal requirement—it is a proactive step towards responsible tax compliance. By spreading out tax payments, it ensures that taxpayers don’t face a financial burden at year-end while also supporting the government’s developmental agenda.
Key takeaway: If your tax liability exceeds ₹10,000, check your eligibility, calculate your income correctly, and pay advance tax on time. When in doubt, seek professional guidance to stay compliant and stress-free.