All about Advance taxes under Indian Income Tax law


By CA Vijaykumar Puri ~ Partner, VPRP & Co LLP, Chartered Accountants


black remote control on yellow surface
black remote control on yellow surface

Every citizen of India is liable to pay tax if their income comes under the Income Tax bracket. The government depends mainly on its tax collection to finance its spending throughout the year. This funding is utilized in the development of nation, reforming infrastructure, and the betterment of society, which helps in shaping the economy of the country. There is a tax structure in India that is followed and as per the tax slabs; individuals are required to pay their taxes.

Let us understand about advance tax and how advance tax is calculated in India.

What is Advance Tax?

Advance tax is the amount of income tax that should be paid much in advance instead of lump-sum payment at the year-end in instalments as per the due dates given by income tax department. Advance tax is also known as 'pay as you earn' tax and is supposed to be paid in the same year the income is received.

Who Needs to Pay Advance Tax?

As per section 208 of Income-tax Act, 1961, a taxpayer needs to pay advance tax if their tax liability is 10,000 or more in a financial year.

Advance tax is for those who earn money from sources other than salary. It is applicable for self-employed individuals, professionals, and business men if their income exceeds a certain limit This includes money that comes from shares, interest earned on fixed deposits, rent or income received from house tenants. Senior citizens who are more than 60 years of age are exempt to advance tax.

How to Calculate Advance Tax?

Listed below are the 4 steps that will help you calculate advance tax:

1. Make an estimate of the total income earned by you.

2. Subtract all expenses from your income, including medical insurance premiums, phone costs, travel expenses, etc.

3. Now, add other income that you received apart from your salary. This includes interest from FDs, house rent, lottery earnings, etc.

4. If the amount of tax calculated is more than 10,000, then you are liable to pay advance tax.

How to Pay Advance Tax?

Just like regular tax payment, advance tax payment is also done using challan. There are many banks that allows you to pay advance tax through challans. You can also pay advance tax online from the comfort of your home. Here's a step-by-step guide that will help you pay advance tax online without any hassles –

1. To pay advance tax online, you need to click on the government's official website -

2. Choose the correct challan that is ITNS 280, ITNS 281, ITNS 282 or ITNS 284 as relevant to pay your advance tax.

3. Fill in your PAN card details along with other important information such as your address, phone number, e-mail address, bank name, etc.

4. Once you have entered all the details, you will be redirected to the net-banking page of the website.

5. Now, you will receive all the information regarding your payment. Enter all payment details and pay your advance tax online successfully.

What are the Benefits of Advance Tax?

Here's a list of benefits you get when you pay tax in advance -

1. It reduces the burden of paying tax at the last moment.

2. It helps in mitigating stress that a taxpayer may undergo while making tax payment at the end of fiscal year.

3. It saves people from failing to make their tax payments.

4. It helps in raising government funds as the government receives interest on the tax collected.

What are Due Dates for Payment of Advance Tax?

Here's a schedule of advance tax payment for individual taxpayers –

15 June - 15% of advance tax liability

15 September - 45% of advance tax liability

15 December - 75% of advance tax liability

15 March - 100% of advance tax liability

1. What if I pay advance tax* less or more than required for a financial year?

The IT Act has provided four dates and the percentage of advance tax to be paid on each of these dates. If by chance you have paid the excess advance tax you would receive a refund subject to section 237 of the Income Tax Act with 6% interest per annum on the excess amount subject to Section 244A of the Act if the excess is more than 10% of the tax liability.

If on March 15, you find that you have a shortfall of advance tax to be paid you can still pay the advance tax before 31st March and the same would be treated as advance tax.

2. What is the penalty for missing the dates of payment of Advance Tax?

If you miss the dates for payment of advance tax you will be levied interest under section 234B and 234C of the Income tax Act.

3. Can I claim deduction under 80C while estimating income for determining my advance tax?

Yes, you can claim deduction under Section 80C while estimating income for determining your advance tax.

4. Is an NRI liable for payment of advance tax?

Yes, an NRI is liable for payment of advance tax on the income earned in India as per provisions of the Income tax Act in force for the relevant assessment year.

In case of any confusion or queries, please seek professional guidance.

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