Who has to pay advance tax and when?

1Who has to pay it

The rule is simple: if your net tax for the year (after TDS already deducted) is ₹10,000 or more, you must pay advance tax during the year. In practice:

• Salaried employees whose TDS fully covers their tax usually don't need to — the employer handles it.
• But add significant non-salary income — capital gains, rental income, FD interest, dividends, freelance or business income — and you often cross ₹10,000 of uncovered tax and must pay.
• Resident senior citizens (60+) with no income from business or profession are exempt.

2The instalment calendar

Advance tax is paid in four instalments through the year. Each deadline is a cumulative percentage of your estimated total tax:

• By 15 June: 15%
• By 15 September: 45% (cumulative)
• By 15 December: 75% (cumulative)
• By 15 March: 100%

3How the interest works (234B and 234C)

Miss the targets and two separate interests can apply, both at 1% per month:

• Section 234C — for missing or underpaying an individual instalment by its due date.
• Section 234B — if you pay less than 90% of your total tax by the end of the year (31 March), charged from April until you pay.

4How to pay and avoid the interest

Estimate your total income for the year, compute the tax, subtract expected TDS, and if the balance is ₹10,000+, pay it in the instalments above. Pay online via the income-tax portal's e-Pay Tax (challan, minor head 100 for advance tax).

If you realise late that you owe — for example after a one-off capital gain — pay it as soon as possible. Paying before 31 March still avoids 234B; paying any self-assessment tax before filing stops further interest from accruing.

5Senior citizens without business income do not pay it

Section 207 exempts a resident individual aged sixty or above from advance tax altogether, provided they have no income from business or profession.

This is the single most useful exemption in the provision and it is widely missed. A retired person living on pension, interest and dividends — however large the tax — pays nothing in instalments and settles the whole liability as self-assessment tax before filing. No 234B or 234C interest arises.

6Presumptive taxpayers pay once, not four times

If you are taxed under the presumptive schemes at section 44AD or 44ADA, the four-instalment calendar does not apply to you.

The whole of your advance tax is payable in a single instalment by 15 March. Miss that date and 234C interest applies on the shortfall, but there is no interest for having paid nothing in June, September or December.

7Estimating when your income is genuinely unpredictable

Advance tax asks you to forecast a year you have not finished. The law accommodates this more than people expect.

The 234C thresholds are calibrated so that paying at least 12% by the first instalment and 36% by the second avoids interest even though the nominal requirement is 15% and 45%. That tolerance exists precisely because early-year estimates are rough.

Where a shortfall arises from capital gains, or from dividend income, no 234C interest is charged for the instalments falling before the income arose, provided the tax is paid in the remaining instalments or by 31 March.

8How 234B and 234C differ, and why you can owe both

The two interest provisions punish different failures and can apply at the same time on the same year.

Section 234C is about the instalments: interest for shortfall or deferment at each of the four dates, computed for three months per instalment. Section 234B is about the year as a whole: interest from 1 April of the assessment year until you pay, charged where you paid less than 90% of the assessed tax in total.

So paying nothing in June but clearing everything by 15 March attracts 234C but not 234B. Paying nothing all year attracts both.