Advance tax is a statutory obligation under the Income-tax Act, 2025. Under Section 404, taxpayers whose estimated tax liability for Tax Year 2026-27 exceeds Rs 10,000 after accounting for TDS are required to pay tax in instalments. The first instalment falls on 15 June 2026.

Who Must Pay

  • All individuals, HUFs, firms, LLPs, and companies whose net tax liability after TDS exceeds Rs 10,000.
  • Salaried individuals with additional income from rent, interest, capital gains, or freelance work are included where residual liability crosses Rs 10,000.
  • Senior citizens aged 60 or above are exempt only if they have no business or professional income.
  • Taxpayers under presumptive taxation, Section 58 of the Income-tax Act, 2025, pay 100 percent in a single instalment by 15 March 2027. No quarterly instalments apply.

The Four Instalment Schedule

  • 15 June 2026: minimum 15 percent of estimated tax liability.
  • 15 September 2026: minimum 45 percent cumulative.
  • 15 December 2026: minimum 75 percent cumulative.
  • 15 March 2027: 100 percent.

The Interest Consequence

  • Section 424 of the Income-tax Act, 2025, corresponding to the old Section 234B, charges interest at 1 percent per month where total advance tax paid by 31 March 2027 is less than 90 percent of assessed tax liability.
  • Section 425, corresponding to the old Section 234C, charges interest at 1 percent per month on the shortfall at each instalment date. This interest cannot be waived by the assessing officer.
  • On an estimated liability of Rs 10 lakh, missing the June instalment entirely and paying everything in March results in an interest cost of approximately Rs 9,000 across deferred instalments, before any Section 424 liability.

What Delayed Payment Actually Costs

Advance tax is a pay-as-you-earn obligation, not a year-end settlement. The interest under Sections 424 and 425 is mandatory and not waivable at the assessing officer's discretion. Taxpayers who underestimate in June can correct in September with limited additional exposure. What they cannot do is defer the entire liability to March without an interest consequence. The estimate for Tax Year 2026-27 should be underway now.