The Income Tax Act, 2025 introduces a structured framework for advance tax under Sections 403 to 408, mandating payment by all assessees on estimated current income, subject to limited exemptions. Resident senior citizens without business income and taxpayers with liability below ₹10,000 are exempt. Advance tax is computed on estimated income after reducing TDS/TCS credits and is payable in four instalments—15%, 45%, 75%, and 100% by 15 June, 15 September, 15 December, and 15 March respectively, with presumptive taxpayers paying in one instalment by 15 March. Interest for deferment (Section 425) applies to instalment shortfalls, while default interest (Section 424) applies if less than 90% of assessed tax is paid. Limited tolerance (12% and 36% thresholds) is allowed for the first two instalments. Relief is also granted for underestimation of capital gains and dividend income if taxes are paid by 31 March. Interest under Section 424 is based on assessed tax, whereas Section 425 depends on returned income.
PROVISIONS RELATED TO ADVANCE TAX PAYMENTS UNDER INCOME TAX ACT, 2025
FAQs on Advance Tax payment under Income Tax Act, 2025
(1) Who is liable to pay Advance Tax under New Income Tax Act, 2025?
Sec 403 requires all the Assessee to pay Advance Tax for the current income for any tax year.
There are 2 exemptions:
(a) Advance Tax is not payable by an Assessee who is –
(i) an individual resident in India;
(ii) a senior citizen (who is of various age of 60 years or more at any time during the tax year) and
(iii) does not have any income chargeable under the head “Profits and gains of business or profession”
(b) If the amount of tax payable is less than Rs.10,000/-, then no advance tax is payable by any category of the Assessee.
(2) How to compute the Advance Tax payable by an Assessee under New Income Tax Act, 2025?
As per Sec 405, the Assessee has to compute the Advance Tax payable by him as detailed below:
| Particulars | Reference |
| Compute Specified Sum = Current Income as estimated by the assessee | Estimated Income |
| Compute Income-tax on Estimated Income at Income-tax Rate in force for the relevant tax year (Tax Rate will be notified in every year’s Finance Act) | B |
| Amount of TDS or TCS available to the credit of the Assessee | C |
| Advance Tax Payable (A) | B – C |
(3) Whether the Income-tax Department will raise any demand for making payment of advance tax payable by the Assessee?
No, the Income-tax Department may not raise demand for making payment of advance tax payable by the Assessee. As per Sec 406, the Assessee himself has to make the computation of advance tax payable (as per Q2 above) and shall pay it on his own accord.
However, where a person has already been assessed by way of regular assessment and the Assessing Officer is of the opinion that such person is liable to pay advance tax, he may require such person to pay advance tax, by an order in writing, specifying the instalment or instalments in which such tax is to be paid, on or before the due date of each instalment specified in Section 408.
(4) What is the due date for making payment of advance tax?
As per Sec 408, all the assessees, who are liable to pay advance tax, shall pay the same in 4 instalments during each financial year and the due date of each instalment and the amount of such instalment shall be as specified in the Table below:
| Due date of instalment | Amount payable |
| On or before the 15th June. | Not less than 15% of such advance tax. |
| On or before the 15th September. | Not less than 45% of such advance tax, as reduced by the amount, if any, paid in the earlier instalment. |
| On or before the 15th December. | Not less than 75% of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments. |
| On or before the 15th March. | The whole amount of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments. |
However, the assessee, if opted to pay income-tax under Sec 58 (Special provision for computing profits and gains of business or profession on presumptive basis) shall pay the whole amount of advance tax on or before the 15th March.
(5) If an assessee makes payment of tax for the tax year between 16th March to 31st March, will it be treated as an advance tax?
As per Sec 408(3), any amount paid by way of advance tax on or before the 31st March, shall be treated as advance tax paid during the financial year ending on that day for all the purposes of this Act.
However, the assessee will have to pay interest @1% under Section 425 (equivalent to erstwhile Sec 234C), if he pays the advance tax after 15th March and before 31st March.
For the purpose of computation of interest on shortfall in payment of advance tax under Sec 424 (equivalent to erstwhile Sec 234B), the tax paid after 15th March and before 31st March will also be considered as advance tax.
(6) What are the consequences of failure to pay Advance Tax or short payment of advance tax on the respective due dates?
For Short payment / deferment of advance tax:
As per Sec 425, if the advance tax paid by the assessee on its current income on or before the respective instalment’s due date is less than advance tax due on returned income, then the assessee shall be liable to pay interest on the amount of Shortfall of advance tax as specified below:
| Due Date of instalment | Advance Tax payable * | Advance tax paid | Shortfall | Interest on shortfall |
| 15th June | 15% | ATP1 | SF1 | 3% |
| 15th September | 45% | ATP2 | SF2 | 3% |
| 15th December | 75% | ATP3 | SF3 | 3% |
| 15th March | 100% | ATP4 | SF4 | 1% |
* Advance Tax payable under Sec 425 shall be computed on Tax Due as per Returned Income.
For default in payment of advance tax:
As per Sec 424, if the advance tax paid by the assessee is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest at the rate of 1% for every month or part of a month, for the period, beginning from the 1st April following such tax year till the date of determination of total income under section 270(1) [Intimation by CPC, after processing the Return of Income filed for the relevant tax year] and upto the date of completion of regular assessment, where a regular assessment is made.
(7) How can I make realistic estimates of current income to pay the advance tax on dynamic economic situation? Whether I need to pay interest for short payment of advance tax on the respective due dates, even if the shortfall is 1% or 2%?
The Income-tax Act is kind enough to grant a tolerance for making estimation of current income for the purpose of making first 2 instalments of advance tax payments.
As per Sec 425(2), the assessee shall not be liable to pay interest under that section, if he has paid advance tax of –
(a) on or before the 15th day of June is 12% or more of the tax due on the returned income; [instead of 15%, 3% tolerance].
(b) on or before the 15th day of September is 36% or more of the tax due on the returned income. [instead of 45%, 9% tolerance].
Please note that if the advance tax paid is less than 12% or 36%, as the case may be, in 1st or 2nd instalment, then interest shall be payable for the shortfall of 15% or 45%, as per Q6 above.
(8) I have made investments in Companies, which declared dividend during March month of the tax year. How can I estimate this dividend for the purpose of payment of advance tax?
The Income-tax Act grants relaxation for such cases. As per Sec 408(4), no interest under that section is payable-
(A) if the shortfall in payment of advance tax is on account of under-estimation of, or failure to estimate the following income—
(i) capital gains;
(ii) income any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature;
(iii) income under the head profits and gains of business or profession accruing or arising for the first time;
(iv) dividend income.
AND
(b) the assessee has paid the full advance tax, remaining instalments of advance tax, if any, or by the 31st day of March of the tax year.
(9) I have paid total advance tax of Rs.1,20,000/- (15th June : Rs.15,000, 15th Sep: Rs.30,000, 15th Dec: Rs.42,000 & 15th March : Rs.33,000) My tax liability as per Income-tax Return is Rs.1,15,000/-. While processing the Return, the Assessing Officer determined the tax as Rs.1,30,000/- and after deducting advance tax of Rs.1,20,000/-, raised a demand for Rs.10,000/-. Whether any interest under Sec 424 or Sec 425 is payable?
Interest U/s. 424 (erstwhile Sec 234B):
| Assessed Tax | Rs.1,30,000 |
| Total advance Tax payable = 90% of the Assessed Tax | Rs.1,17,000 |
| Advance Tax paid | Rs.1,20,000 |
| Interest U/s. 424 | Nil |
Interest U/s. 425 (erstwhile Sec 234C):
1st instalment:
| Tax Due on Returned Income | Rs.1,15,000 |
| 1st instalment of Advance Tax payable = 15% of the above Tax | Rs.17,250 |
| Advance Tax paid | Rs.15,000 |
| Shortfall | Rs.2,250 |
| Interest U/s. 425 | Nil |
As per Sec 425(2), the assessee shall not be liable to pay interest under that section, if he has paid advance tax 12% or more of the tax due on the returned income. In the given case, the advance tax paid is 13%. Hence no interest is payable.
2nd instalment:
| Tax Due on Returned Income | Rs.1,15,000 |
| 2nd instalment of Advance Tax payable = 45% of the above Tax | Rs.51,750 |
| Advance Tax paid | Rs.45,000 |
| Shortfall | Rs.6,750 |
| Interest U/s. 425 | Nil |
As per Sec 425(2), the assessee shall not be liable to pay interest under that section, if he has paid advance tax 36% or more of the tax due on the returned income. In the given case, the advance tax paid is 39%. Hence no interest is payable.
3rd instalment:
| Tax Due on Returned Income | Rs.1,15,000 |
| 3rd instalment of Advance Tax payable = 75% of the above Tax | Rs.86,250 |
| Advance Tax paid | Rs.87,000 |
| Shortfall | Nil |
| Interest U/s. 425 | Nil |
4th instalment:
| Tax Due on Returned Income | Rs.1,15,000 |
| 4th instalment of Advance Tax payable = 100% of the above Tax | Rs.1,15,000 |
| Advance Tax paid | Rs.1,20,000 |
| Shortfall | Nil |
| Interest U/s. 425 | Nil |
Sec 424 computation of interest depends on Assessed tax
Sec 425 computation of interest depends on tax on Returned Income.
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Disclaimer: Readers are advised to refer to the Income-tax Act, 1961 and the Income-tax Act, 2025 before taking any decision. The author is not responsible for consequences arising from reliance on this article.
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