Advance Tax Under Income Tax Act, 2025: Liability, Due Dates & Interest

Advance Tax under Income-tax Act, 2025 – Liability, Computation, Due Dates, Interest & Compliance

Summary: The article provides a comprehensive guide to advance tax under the Income-tax Act, 2025 and the Income-tax Rules, 2026, applicable from Tax Year 2026-27 onwards. Advance tax continues to operate on a pay-as-you-earn basis and is governed by Sections 403 to 408, with interest provisions contained in Sections 423, 424, and 425. Every assessee, including individuals, firms, LLPs, companies, and non-residents, must pay advance tax if the net tax liability after considering TDS, TCS, and reliefs is Rs. 10,000 or more. Resident senior citizens without business or professional income remain exempt. The instalment structure remains unchanged at 15%, 45%, 75%, and 100% by 15 June, 15 September, 15 December, and 15 March respectively, while presumptive taxpayers may pay in a single instalment. The article explains computation methods, due dates, Assessing Officer powers, treatment of special incomes, interest for default or deferment, payment procedures, and practical compliance considerations under the new legislation.

ADVANCE TAX Under the Income-tax Act, 2025 and the Income-tax Rules, 2026: A practitioner’s reference — liability, computation, due dates, interest and compliance –Operative for Tax Year 2026-27 onwards (income arising on or after 1 April 2026).

A1. Snapshot

A2. Section map — 1961 Act → 2025 Act

The 2025 Act re-numbers the provisions but largely preserves the substance. Use this map to translate old references.

*Sections 407, 409 and 410 broadly correspond to the connected machinery (order amendment, default, and credit). Confirm the exact text of the bare Act before citing in formal opinions.

A3. Flowchart — Am I liable to pay advance tax?

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A4. Due dates & instalments (Section 408)

Regular taxpayers — four instalments

If a due date falls on a Sunday or holiday, payment on the next working day is treated as in time (CBDT practice).

Presumptive scheme (Section 58 / Section 408(2))

The full liability of a presumptive assessee may also be discharged by 31 March, but doing so after 15 March attracts a short spell of Section 425 interest.

A5. Interest at a glance

Part of a month is rounded up to a full month; the tax on which interest is charged is rounded down to the nearest ₹100.

A6. Computation method — five steps

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Part B — Detailed Commentary

B1. Legislative framework & effective date

Advance tax under the Income-tax Act, 2025 is governed by Sections 403 to 408, supported by the machinery for interest in Sections 423 to 425 and the relevant Income-tax Rules, 2026. The 2025 Act re-organises the earlier regime — separating advance tax paid voluntarily by the assessee from advance tax demanded by the Assessing Officer — and removes redundant language, but it does not change the core policy: the threshold, instalment percentages, due dates and interest rates all continue as before.

B2. Liability — Sections 403 & 404

Section 403 casts the basic charge: every assessee must pay advance tax on the current income of the tax year, in accordance with Sections 404 to 408. Section 404 sets the gateway — advance tax is payable only where the tax payable for the year is ₹10,000 or more, computed after reducing expected TDS, TCS, and available reliefs/credits.

Who is covered

• All categories of assessee — individuals, HUFs, firms, LLPs, companies, AOPs/BOIs, and trusts — once the ₹10,000 threshold is crossed.
• Salaried individuals, where TDS on salary does not cover tax on other income (rent, interest, capital gains, dividends, freelance receipts).
• Non-residents (NRIs) on income that accrues, arises, or is received in India, where tax payable exceeds the threshold.

Exemptions

• Resident senior citizen: a resident individual aged 60 or more at any time in the tax year who has noincome under “Profits and gains of business or profession” is not required to pay advance tax. A senior citizen with business/professional income remains liable.
• Below threshold: any assessee whose tax payable for the year is less than ₹10,000 — no advance tax, regardless of category.

B3. Computation of advance tax — Section 405

Section 405 prescribes a self-assessment style estimate. The assessee estimates current income, applies the rates in force for the tax year, and reduces the tax expected to be covered by deduction/collection at source. The balance is the “advance tax” to be discharged in instalments under Section 408.

B4. Order by the Assessing Officer — Sections 406 / 407

The system is primarily self-driven — the assessee estimates and pays without any notice. Section 406 provides a fallback: where an assessee has already been subjected to a regular assessment, and the Assessing Officer forms the view that the assessee is liable to advance tax, the AO may pass a written order specifying the instalment(s) and amounts payable, aligned to the Section 408 due dates. The AO’s order can be revised if the basis changes. Importantly, the absence of such an order does not relieve the assessee — the obligation to compute and pay under Sections 403 to 405 stands regardless.

B5. Due dates and instalments — Section 408

Four instalments apply to regular taxpayers (15%, 45%, 75%, 100% cumulative by 15 June, 15 September, 15 December and 15 March respectively). Assessees opting for the presumptive scheme under Section 58 discharge the entire liability in a single instalment by 15 March under Section 408(2). See tables A4 above.

B6. Special incomes — capital gains, casual income and dividends

Certain incomes cannot be foreseen at the start of the year. The law therefore relaxes the deferment interest (Section 425) for shortfalls attributable to:

• Capital gains;
• Winnings from lotteries, crossword puzzles, races and other casual income;
• Income from a business or profession of a nature first arising during the year (first-time income); and
• Dividend income (other than deemed dividend).

Where such income arises, no Section 425 interest is charged on that portion provided the tax on it is paid in the remaining instalments falling due after the income arises — or, if it arises after the last instalment date, by 31 March of the tax year. The relief is income-specific; the rest of the regular liability must still be paid on the normal schedule.

B7. Interest for default — Section 424 (old 234B)

Section 424 applies where the assessee either pays no advance tax, or pays less than 90% of the “assessed tax”. Assessed tax means the tax on total income as finally determined, less TDS/TCS and reliefs.

Worked example — Section 424

Assessed tax ₹2,00,000; advance tax + TDS paid during the year ₹1,40,000; balance self-assessment tax paid on 20 July after year-end.

• 90% of assessed tax = ₹1,80,000. Paid ₹1,40,000 (< 90%) → Section 424 applies.
• Shortfall = 2,00,000 − 1,40,000 = ₹60,000.
• Period = April + May + June + July = 4 months.
• Interest = 60,000 × 1% × 4 = ₹2,400.

B8. Interest for deferment — Section 425 (old 234C)

Section 425 penalises late or short payment of individual instalments, even where the total is eventually paid. A tolerance applies to the first two instalments: no interest if at least 12% is paid by 15 June and at least 36% by 15 September (instead of 15% and 45%).

Worked example — Section 425

Total advance tax liability for the year ₹2,00,000. The assessee pays nothing until 15 December (₹1,50,000) and the balance on 15 March.

Note how interest accrues on the June and September shortfalls even though the assessee “caught up” by December — deferment interest looks at each milestone independently.

B9. Interest for late return — Section 423 (old 234A)

Although not strictly an advance-tax provision, Section 423 frequently travels with the above. Where the return is filed after the due date, simple interest at 1% per month runs on the unpaid tax from the due date until the date of filing. Paying tax in full before the due date neutralises Section 423 even if the return itself is late.

B10. End-to-end calculation — worked illustration

Estimated figures for an individual under the default regime (illustrative; apply the actual rates of the Finance Act for the tax year):

Instalment schedule

The capital gain arises only in November, so the tax on it need feature only from the 15 December instalment onward; no Section 425 interest is charged for the June/September instalments on that slice (see B6).

B11. How to pay

1. Open the income-tax portal and choose “e-Pay Tax” (login is optional — the quick-link route works with PAN + OTP).

2. Select “Income Tax”, then choose the Act — “Income Tax Act, 2025” for Tax Year 2026-27 (payments for AY up to 2026-27 stay under the 1961 Act).

3. Choose minor head “Advance Tax (100)” — not “Self-Assessment Tax (300)”.

4. Enter tax, surcharge, cess and interest components separately; the portal generates the challan with a Challan Reference Number (CRN).

5. Pay via net-banking / NEFT-RTGS / card / UPI and save the challan — the CRN, BSR code and challan serial number are needed in the return.

6. Mistakes in tax year / major-minor head can be fixed through “Challan Correction” on the portal (year change within 7 days; head change within 30 days).

B12. Things to take care of — practitioner checklist

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About the Author: CA Rupinder Shah is a Fellow Chartered Accountant (FCA), a B.Com (Hons.) graduate from Shri Ram College of Commerce, and a DIFRS First Rank Holder from the University of Delhi. He is a Partner in the Tax & Regulatory Advisory practice of Bhupinder Shah & Co., Chartered Accountants, and advises clients on tax, regulatory, and compliance matters, including cross-border transactions under the Income-tax Act, 2025 framework. His areas of practice include GST (including audits and litigation), income tax, statutory and tax audits, FEMA, company formation and compliance, internal and management audits, consultancy, and certification services. He serves as a Special Invitee to the Indirect Tax Committee (NIRC of ICAI), MSME & Startup Committee (ICAI), and the Committee on Financial Markets & Investors’ Protection (NIRC of ICAI). Established in 1988, Bhupinder Shah & Co. operates from Pitampura, Connaught Place, and South Extension, New Delhi.

 Disclaimer: This note is a general reference on advance tax under the Income-tax Act, 2025 and is current to June 2026. Section numbers for the connected machinery provisions should be verified against the bare Act and the Income-tax Rules, 2026 before being relied upon in formal opinions or filings. Tax rates, surcharge and cess depend on the Finance Act applicable to the relevant tax year. This is not a substitute for specific professional advice on a given fact pattern.