How to Plan and Pay Advance Tax in India: Complete Step-by-Step Guide

If your tax bill at the end of the year regularly surprises you – or if you’ve received interest charges under Sections 234B and 234C – you may not be planning your advance tax properly. Advance tax is simply paying tax during the year as you earn, instead of all at once when you file your return.

In this guide, I’ll explain who needs to pay advance tax, how to estimate and schedule your payments, and how to actually pay using the online challan system. Once you set up a simple process, advance tax becomes a routine quarterly task rather than a source of stress.

Who Has to Pay Advance Tax?

Generally, you need to pay advance tax if:

• Your total tax liability for the year, after considering TDS, is ₹10,000 or more
• This is common for:
• Freelancers and consultants
• Small business owners
• Individuals with significant rental income
• Individuals realizing large capital gains (e.g., from property or shares)

Salaried individuals whose employers deduct sufficient TDS may not need to pay advance tax separately – unless they have substantial other income not fully covered by TDS.

Advance Tax Installments (Illustrative Structure)

For most non-corporate taxpayers, advance tax is paid in installments during the financial year. Dates and percentages can change; classically they have been structured around:

• 15 June
• 15 September
• 15 December
• 15 March

On each date, a certain percentage of total estimated tax should have been paid. The key idea:

• You estimate your full-year income and tax
• Pay tax in chunks during the year, updating your estimates as you go

Step 1: Estimate Your Total Income for the Year

At the start of the year (April–June):

• Estimate:
• Salary (if applicable)
• Business/freelance income (projected)
• Rental income
• Interest/dividend income
• Likely capital gains (property, shares, etc.)

• From this, subtract:
• Eligible deductions (80C, 80D, NPS, etc.)
• Exempt incomes, if any

Use our Income Tax Calculator to compute your total estimated tax under old/new regimes.

Step 2: Subtract TDS and Reliefs

From your estimated total tax for the year, subtract:

• TDS expected to be deducted by employers, banks, and others (you can get this from Form 16/16A projections and past patterns)
• Any reliefs or credits you are already sure about

The balance is your approximate advance tax requirement for the year.

Step 3: Convert Annual Tax into Installments

Once you know your total estimated advance tax:

• Spread it across the scheduled dates (June, September, December, March)
• As the year progresses, update your estimates:
• If your income turns out higher, adjust later installments upward
• If lower, you can reduce later installments

The idea is not to be perfect from day one, but to be roughly right across the year to avoid large interest charges at the end.

Step 4: How to Pay Advance Tax Online (Challan 280 Workflow)

To pay:

1. Visit the official income tax e-payment portal (through your bank or the tax site)
2. Choose Challan 280 (Self-Assessment / Advance Tax)
3. Select:
4. Tax applicable: “0021 – Income Tax (Other than Companies)”
5. Type of payment: “100 – Advance Tax” (for advance tax installments)
6. Enter:
7. Your PAN
8. Assessment Year (for income in FY 2025–26, AY is 2026–27)
9. Address and other details
10. Choose your bank and payment method (net banking/UPI/cards as permitted)
11. Complete the payment and save the challan receipt with BSR code and challan number

Later, while filing ITR, you will enter these challan details under “Tax Paid (Other than TDS/TCS)”.

Step 5: Tracking and Adjusting During the Year

Each quarter:

• Revisit your income estimates:
• Has business/freelance income deviated significantly from plan?
• Have you realized any unexpected capital gains?
• Use the Advance Tax Calculator (if available in your toolkit) or the main Income Tax Calculator to recompute required tax

Then:

• Compare tax you should have paid by that stage with what you have already paid as advance tax + TDS
• If there is a gap, use the upcoming installment to catch up as far as reasonable

What Happens If You Don’t Pay or Underpay Advance Tax?

If your advance tax payments are significantly delayed or short:

• You may be charged interest under Sections 234B and 234C, which:
• 234B covers default in payment of advance tax
• 234C covers deferment or shortfall in scheduled installments

These interests are calculated by the income tax system when you file your return.

While occasional small shortfalls are common and manageable, repeated or large underpayments can add a noticeable cost on top of your regular tax.

Who Should Pay Special Attention to Advance Tax?

• Freelancers and consultants with fluctuating monthly income
• Small business owners with seasonal revenues
• Individuals with large property or equity transactions during the year
• Salaried individuals with significant side income (consulting, rent, trading) not fully covered by TDS

For these profiles, a simple quarterly routine of:

• Updating income estimates
• Checking current tax and TDS position
• Paying a top-up via Challan 280

is often enough to stay out of trouble.

Final Thoughts

Advance tax is not a separate tax – it’s simply the timing of paying what you owe. With a basic plan and two or three short review sessions during the year, you can prevent large year-end surprises and interest charges.

Start by estimating your full-year income using our Income Tax Calculator, subtracting expected TDS, and then planning your quarterly advance tax payments accordingly. Keep challan receipts organized, and by the time you file your return, most of the heavy lifting will already be done.

Disclaimer: Advance tax percentages, due dates, and associated interest provisions may change over time. This guide is based on the current framework and is intended for educational purposes only. Always verify latest rules on the official income tax portal or with a qualified tax professional, especially if your income profile is complex.