TAX COMPLIANCE ADVISORY-ADVNACE TAX

TAX COMPLIANCE ADVISORY

Payment of Advance Income Tax under the Income-Tax Act, 2025

Statutory Framework: Income-Tax Act, 2025 (Replacing Income-Tax Act, 1961)

Applicable Period: Tax Year 2026–27 onwards

Target Audience: All Individual Taxpayers, Salaried Persons with Non-Salary Income, Professionals, Business Owners & Corporate Assessees

1. Statutory Applicability & Exemption

Under Section 404 read with Section 403 of the Income-Tax Act, 2025, advance tax is payable during any financial year in respect of the estimated current income of the assessee where the net tax payable for the Tax Year is ₹10,000 or more (after adjusting TDS, TCS, eligible tax reliefs, and foreign tax credits).

EXEMPTION FOR SENIOR CITIZENS (Section 403(3)):
An individual resident in India who is 60 years of age or older at any time during the tax year and does NOT have any income chargeable under 'Profits and Gains of Business or Profession' is completely exempt from paying Advance Tax.

2. How to Estimate & Calculate Advance Tax

As per Section 406 of the Act, taxpayers are required to self-estimate their total income and remit advance tax in quarterly installments. Follow this 5-step methodology:

1. Estimate Total Gross Income: Aggregate estimated earnings from all sources — Salary, House Property, Business/Profession, Capital Gains, and Income from Other Sources (Interest, Dividends, etc.).
2. Claim Deductions & Exemptions: Subtract eligible statutory deductions and regime-specific benefits available under the Act.
3. Compute Tax Liability: Apply the applicable tax slab rates corresponding to your chosen tax regime for the current Tax Year.
4. Subtract Prepaid Tax Credits: Deduct estimated Tax Deducted at Source (TDS under Sec 392/393), Tax Collected at Source (TCS), foreign tax credits, and section reliefs.
5. Determine Net Advance Tax: If Net Tax Payable ≥ ₹10,000, payment is mandatory as per the statutory schedule.

Net Advance Tax Payable = (Estimated Total Tax Liability) − (TDS + TCS + Tax Credits)

3. Due Dates & Installment Schedule (Section 408)

Taxpayers must deposit advance tax in four cumulative installments (or a single installment for presumptive taxpayers) by the statutory deadlines under Section 408(1):

Installment Due Date	Cumulative Tax Payable	Applicable Taxpayer Category
On or before 15th June	Minimum 15% of total tax	All Regular Taxpayers (Corporate & Non-Corporate)
On or before 15th September	Minimum 45% of total tax	All Regular Taxpayers (Corporate & Non-Corporate)
On or before 15th December	Minimum 75% of total tax	All Regular Taxpayers (Corporate & Non-Corporate)
On or before 15th March	100% of total tax	All Regular Taxpayers (Corporate & Non-Corporate)
On or before 15th March	100% of total tax (Single)	Presumptive Taxation Scheme (Section 58(2))

4. Mandatory Interest on Delay / Shortfall (Sections 425 & 424)

Non-payment or short payment triggers statutory interest charges under Chapter XIX of the Income-Tax Act, 2025.

A. Section 425 — Interest for Deferment of Advance Tax

Levied at 1% simple interest per month (3% per quarter) on the shortfall amount for deferred quarterly installments:

Due Date	Required %	Safe Harbour Threshold	Interest Rate & Period
15th June	15% of tax due	No interest if ≥ 12% paid	3% (1% / month for 3 mos)
15th September	45% of tax due	No interest if ≥ 36% paid	3% (1% / month for 3 mos)
15th December	75% of tax due	Charged on shortfall to 75%	3% (1% / month for 3 mos)
15th March	100% of tax due	Charged on shortfall to 100%	1% (for 1 month)

SPECIAL RELIEF FOR UNEXPECTED INCOME:
If shortfall in advance tax occurs due to unexpected income such as Capital Gains, Lottery/Dividend Winnings, or New Business Income, no interest u/s 425 shall be levied provided the tax on such income is fully paid in the remaining upcoming installments on or before 15th March.

B. Section 424 — Interest for Default in Payment of Advance Tax

Under Section 424, if total advance tax paid during the financial year is less than 90% of the net assessed tax liability, simple interest @ 1% per month is charged starting from April 1st of the Assessment/Tax Year until the date of regular assessment.

5. Actionable Checklist for Taxpayers

• ✔ Quarterly Income Review: Re-estimate total annual income before June 15, Sept 15, Dec 15, and Mar 15.
• ✔ Capital Gain Tracking: Pay advance tax on capital gains realized in the immediate next upcoming installment.
• ✔ TDS/TCS Reconciliation: Cross-verify Form 26AS / AIS before computing final advance tax liability.
• ✔ Record Keeping: Download and archive all challans for seamless tax filing and audit compliance.

Published for Tax Compliance Awareness • Income-Tax Act, 2025 Framework