Advance Tax 2025-26: Who Should Pay and What Happens If You Don’t

Advance Tax 2025-26: Who Should Pay and What Happens If You Don’t

Advance tax is the process of paying your income tax liability in 4 instalments throughout the financial year, rather than as a single lump sum at the end of the year. For FY 2025-26, the third instalment of advance tax must be paid by December 15, 2025. (in the third quarter).

Instead of waiting till the end of the year to pay all your income tax at once, the government asks you to estimate how much you will earn in the current year. The assessee is required to pay the estimated tax in instalments throughout the same financial year.

Who is liable to pay advance tax?

• If a person is expected to owe Rs 10,000 or more in income tax for the year, they must pay some of that tax in advance during the year.
• If someone is a senior citizen (60 years or older) and they do not earn income from a business or profession (for example, they only have a pension, interest, rent, etc.), then they don’t have to pay advance tax. They can simply pay their full tax at the end of the year while filing their return.

Consequences and penalties for missing the deadline

The following are the penalties and consequences of missing the advance tax deadline:

• If you delay your advance tax, it may attract interest at 1% per month and 12% annually under the Income-tax Act.
• Even a 1-day delay attracts a three-month interest charge.

Deadlines for advance tax payments

The following are some other important deadlines for advance tax payments:

June 15: You should pay 15% of your total advance tax.

September 15: Look at how much advance tax you already paid earlier. After subtracting that, make sure you have paid a total of 45% by this date.

December 15: Again, subtract whatever you have already paid so far. By this date, you should have paid 75% in total.

March 15: Pay whatever remaining amount is left to complete your full advance tax.

What are the consequences of failure to deposit advance tax?

If you do not pay the advance tax in accordance with the mentioned date, you may have to pay extra interest. There are two types of interest:

a) Interest for not paying enough advance tax (Section 234B)

As per Section 234B, you must pay 90% of your tax liability before March 31 via advance tax or TDS/TCS.

b) Interest for paying instalments late (Section 234C)

As per Section 234C, if you failed to pay advance tax instalments before the respective due dates, the government charges you interest at 1% per month on the amount you should have paid.