Advance Tax in India: The Complete Beginner's Guide for FY 2026-27

What You'll Learn

By the end of this guide, you'll understand:

• Why income tax in India is due four times a year, not once
• Who must pay advance tax and who is genuinely exempt
• The two interest charges, and which one actually hurts
• The relief provisions that forgive an honest underestimate
• How to catch up if you are already behind

Reading Time: 16 minutes

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The Bill Nobody Warned You About

Every July, thousands of otherwise careful people sit down to file their return and find a number they did not expect. Not the tax itself, which they knew about. The interest on top of it.

The conversation usually goes the same way. "But TDS was deducted from my salary all year." Yes, it was. "And I was going to pay the balance when I filed." That is exactly the problem.

India does not run on an annual settlement. It runs on pay as you earn. If your tax for the year works out to 10,000 rupees or more after accounting for tax already deducted at source, the law does not wait for your return. It wants the money in four instalments spread across the year, and it charges interest on every rupee that arrives late.

Nobody sends you a reminder. There is no notice, no email, no letter. The deadlines simply pass, and the meter runs.

If you want to see your own numbers while you read, our advance tax calculator works out the four instalments for FY 2026-27 and shows what a missed deadline costs.

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What Advance Tax Actually Is

Advance tax is your income tax for the year, paid in pieces during the year rather than after it ends.

The financial year runs from 1 April to 31 March. Under the old law it was called the "previous year"; the Income-tax Act, 2025 renamed it the tax year, which is a good deal clearer. You are taxed on what you earn in that window, and the assessment year that follows is when you file and settle up.

For FY 2026-27, the assessment year is 2027-28. Remember that pair, because you will need it when you actually make the payment and the portal asks which year you are paying for.

Some tax reaches the government automatically. Your employer deducts TDS, which stands for Tax Deducted at Source, from every salary payment. Your bank deducts TDS on fixed deposit interest. A buyer deducts TDS when they pay you professional fees. That machinery covers a good part of most people's liability.

Advance tax is what covers the rest.

💡 Why This Matters If You Invest

The whole system rests on an assumption that quietly fails for anyone with investments: that TDS roughly matches your real tax.

It usually does not. Consider the three most common gaps:

Fixed deposit interest. Your bank deducts TDS at 10 percent. If you are in the 30 percent slab, the bank has collected a third of what you owe on that interest. The remaining two thirds is yours to pay, on schedule, during the year.

Capital gains on listed shares. No TDS is deducted at all. None. You sell shares, the money lands in your account in full, and the entire tax on that gain is your responsibility to pay by the next instalment date.

Dividends. TDS applies only above 10,000 rupees from a single company in a year, and then at 10 percent against a slab rate that may be three times higher.

Here is what actually gets deducted, by source:

Salary is the only row where TDS is designed to cover your whole liability. Every other row leaves a gap, and the last row is a hole.

There is a subtler trap in the salary row. Your employer computes your tax on the salary it pays you, and applies the 87A rebate on that basis. If your salary is 12.75 lakh, the rebate wipes out the tax and your employer deducts nothing at all. Book a large capital gain and your total income crosses 12 lakh, the rebate vanishes from your real liability, and the salary tax your employer never deducted lands on you as advance tax. Nobody tells the employer, and nobody tells you.

This is why the people most likely to get caught are not tax evaders. They are ordinary salaried investors who assumed the system was handling it.

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Who Has to Pay

The test is simple. Estimate your total tax for the year. Subtract the TDS and TCS that will be deducted. If what remains is 10,000 rupees or more, you are in the advance tax system.

TCS, Tax Collected at Source, is the mirror image of TDS. It comes up most often on foreign remittances under the Liberalised Remittance Scheme, so if you have sent money abroad for travel or education, check for it.

Who is exempt

One group is genuinely outside the system. A resident individual aged 60 or above with no income from business or profession does not pay advance tax at all, under section 207. It does not matter how large the liability is.

A retiree with a pension, a large fixed deposit portfolio and a 3 lakh rupee tax bill pays nothing in instalments. They simply pay the whole amount as self assessment tax before filing, and no interest arises for deferment.

Two conditions, both required. You must be resident, and you must have no business or professional income. A 65 year old running a consultancy is back in the schedule like everyone else.

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The Four Deadlines

Here is the schedule for FY 2026-27. The percentages are cumulative, which is the single most common point of confusion.

Read the third column, not the fourth. By 15 September you must have paid 45 percent of your total tax in aggregate, counting the June payment. You do not pay another 45 percent on top.

If your advance tax for the year is 1,00,000 rupees, you need 15,000 in the bank by 15 June, a cumulative 45,000 by 15 September, 75,000 by 15 December and the full 1,00,000 by 15 March.

One exception is worth knowing even though it will not apply to most readers. Taxpayers using presumptive taxation under sections 44AD or 44ADA, which covers small businesses and specified professionals below certain turnover limits, skip the quarterly schedule entirely. They pay 100 percent in a single instalment by 15 March.

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The Section Numbers Changed This Year

If you have read anything about advance tax before, you know the interest provisions as sections 234A, 234B and 234C. From FY 2026-27 those numbers are gone.

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 with effect from 1 April 2026. The interest provisions were renumbered:

The substance of all three is unchanged. The rates, the thresholds, the reliefs, the calculation method: identical. Only the labels moved.

This matters practically for two reasons. First, most articles and calculators online still say 234C, and they are not wrong about how it works, so do not discard older guidance. Second, when you look at your own intimation or speak to a chartered accountant about FY 2026-27, you will see the new numbers, and it helps to know they refer to something familiar.

Throughout the rest of this guide I use the new numbers with the old ones alongside.

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Section 425, Interest for Missing a Deadline

This is the charge most people meet first. Old section 234C.

The rule is 1 percent per month, simple interest, on the shortfall at each due date. The number of months differs by instalment:

Each instalment is judged on its own, at its own due date. This has a consequence people find counterintuitive, so it is worth stating plainly:

Catching up later does not undo interest already incurred.

If you miss the June instalment and pay it in August, the June interest is still charged. What you have prevented is the September shortfall. The meter for June already ran.

The relief that saves most people

Here is the provision that turns a punitive rule into a reasonable one, and it is the part most guides skip.

Pay at least 12 percent by 15 June and no section 425 interest arises for the first instalment. Pay at least 36 percent by 15 September and none arises for the second. Even though the schedule formally asks for 15 percent and 45 percent.

The logic is fair. In June you are estimating a year that has barely started. You do not know what your bonus will be, whether you will book a gain, what your interest income will total. The law accepts that an honest estimate will run a little low and forgives the gap.

What it does not forgive is paying nothing. There is no relief band at zero. The third and fourth instalments get no such cushion either, because by December you should know your year reasonably well.

A worked example

Suppose your advance tax for the year is 1,00,000 rupees and you pay nothing at all until you file.

• 15 June: short by 15,000. Interest is 15,000 at 1 percent for 3 months, which is 450.
• 15 September: short by 45,000. That is 45,000 at 1 percent for 3 months, which is 1,350.
• 15 December: short by 75,000. That is 2,250.
• 15 March: short by 1,00,000, but only one month. That is 1,000.

Total section 425 interest: 5,050 rupees, about 5 percent of the tax.

One technical detail for anyone checking the arithmetic against their own intimation. Rule 119A rounds the amount interest is computed on down to the nearest 100 rupees before applying the rate. On large sums it is loose change, but it explains small differences between your calculation and the department's.

💡 Why This Matters Less Than the Next One

Section 425 is annoying but bounded. It stops when the year stops. Miss every deadline and you pay roughly 5 percent of your liability, which is real money but not a catastrophe.

The next one is different.

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Section 424, The Expensive One

Old section 234B. This is the charge that actually hurts, and it works on a completely different principle.

Section 424 does not care about individual deadlines. It asks one question at the end of the year: did you pay at least 90 percent of your tax by 31 March?

If yes, nothing happens, regardless of how badly you missed the interim dates.

If no, 1 percent per month runs on the entire shortfall, starting 1 April and continuing until you actually pay.

That last clause is what makes it expensive. Section 425 has a fixed ceiling. Section 424 keeps growing. File in July and you owe four months. Drift to September and it is six. Get caught up in a scrutiny that resolves two years later and you owe twenty four months of interest on the whole amount.

Continuing the example above, with 1,00,000 of tax and nothing paid all year, filing on 31 July 2027 adds 1,00,000 at 1 percent for 4 months, which is 4,000 rupees on top of the 5,050 already accrued. Combined interest of just over 9,000 rupees on a 1,00,000 rupee liability, and the number climbs the longer you take.

The 90 percent threshold is a genuine cliff. Pay 91 percent and section 424 does not apply at all. Pay 89 percent and it applies to the full 11 percent shortfall, not just the 1 percent by which you missed. If you find yourself near the line in March, paying a little extra to clear 90 percent is one of the highest return decisions available to you.

There is also section 423, old 234A, which adds a further 1 percent a month if you file the return itself after the due date. That one is entirely avoidable: file on time and it never arises.

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The Capital Gains Exception

Everything above assumes you could have seen your income coming. Capital gains are the case where you obviously could not.

You cannot forecast in June a gain you will book in November. The law recognises this. Where a shortfall in an instalment arises because of capital gains, dividend income, winnings from lotteries, or first-time income from a new business, no section 425 interest applies, provided you pay the tax on that income:

• in the instalment immediately following the one in which the income arose, or
• by 31 March, if the income arose in the final quarter

So if you sell shares in October and book a 5 lakh rupee gain, you are not penalised for having failed to predict it in June or September. You must pay the tax on it by 15 December, the next due date after the sale. Do that and you are clear.

One detail worth getting right: the windows are not calendar quarters. They are the gaps between the instalment dates, because the relief is written around the instalments that remain due after the income arose. A gain booked on 20 June falls in the second window, not the first. The five windows are 1 April to 15 June, 16 June to 15 September, 16 September to 15 December, 16 December to 15 March, and finally 16 to 31 March, where no instalment date is left at all.

Our calculator has an annual and a by date booked mode for exactly this reason. Entering a single yearly figure forces the tool to assume the gain was there from April, which overstates what you owed at the June and September deadlines. Telling it when the gain actually landed gives you the real number.

Two cautions. First, this relief covers only section 425. It does not exempt you from section 424. The 90 percent test at year end still applies, so the tax on that gain must be paid before 31 March regardless.

Second, the relief is specific to the unforeseeable income. It does not forgive the shortfall on your salary and interest income, which you could and should have estimated.

💡 Why This Matters When You Sell

This exception changes how you should think about the timing of a sale, and it connects to something broader about portfolio construction.

If you are rebalancing a portfolio, the quarter in which you book a gain determines your deadline for paying tax on it. A sale on 10 December gives you five days. The same sale on 20 December gives you until 15 March. That is not a reason to distort a good investment decision, but it is worth knowing when the decision is otherwise finely balanced.

More usefully, it is an argument for holding quality for long periods. An investor who trades frequently faces this calculation four times a year. One who buys good businesses and holds them faces it rarely. If you are still working out what "quality" means in practice, our guides to economic moats and when to buy are the place to start, and the diversification guide covers how rebalancing decisions arise in the first place.

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Example One, The Salaried Investor

Priya earns 18,00,000 rupees in salary. She has 80,000 of fixed deposit interest and books 2,00,000 of long-term capital gains on an equity index fund in August. Her employer will deduct 1,50,000 of TDS across the year.

Her tax, under the new regime for FY 2026-27:

Salary of 18,00,000 less the 75,000 standard deduction is 17,25,000. Add 80,000 of interest and her slab income is 18,05,000.

Applying the slabs: nothing on the first 4,00,000, then 5 percent on the next 4,00,000 which is 20,000, then 10 percent on the next 4,00,000 which is 40,000, then 15 percent on the next 4,00,000 which is 60,000, then 20 percent on the remaining 2,05,000 which is 41,000. Her slab tax is 1,61,000.

On the capital gains, the first 1,25,000 of long-term equity gains is exempt each year. The remaining 75,000 is taxed at 12.5 percent, which is 9,375.

Total before cess is 1,70,375. Add health and education cess at 4 percent, or 6,815, and her total tax is 1,77,190.

Less 1,50,000 of TDS, her advance tax liability is 27,190 rupees.

Her schedule: 4,079 by 15 June, a cumulative 12,236 by 15 September, 20,393 by 15 December and the full 27,190 by 15 March.

What she should notice: her employer's TDS covers her salary, but nothing covers the FD interest above the bank's 10 percent, and nothing at all covers the capital gain. Those two items are essentially her entire advance tax bill. Because the gain arose in August, the capital gains relief means she has until 15 December to pay the tax on it without section 425 interest.

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Example Two, The Gain in December

Rahul has the same salary and TDS as Priya but no interest income. In late December he sells a holding and books 8,00,000 of long-term gains.

His slab tax is lower, since he has no FD interest: 1,61,000 less the 20 percent on 80,000, so 1,45,000. On the gains, 8,00,000 less the 1,25,000 exemption leaves 6,75,000 at 12.5 percent, which is 84,375. With cess, his total tax is around 2,38,000, and after TDS his advance tax liability is roughly 88,000 rupees.

Here is what matters. Almost all of that arose in the last week of December, after the 15 December deadline had already passed.

He is not penalised for it. The capital gains exception means the tax on that gain can be paid by 15 March without section 425 interest, because the income arose in the final quarter.

But he must actually pay it. If Rahul waits until he files in July 2027, section 424 applies with full force: he will have paid well under 90 percent of his tax by 31 March, and 1 percent a month runs on the whole shortfall from 1 April. Four months of that on roughly 80,000 rupees is 3,200 rupees, and it keeps growing until he pays.

The lesson is narrow but important. The capital gains exception buys you timing, not exemption. The 31 March wall is real for everyone.

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How to Actually Pay

The mechanics trip people up more than the arithmetic.

1. Go to the income tax portal at incometax.gov.in and open e-Pay Tax. You do not need to log in to make a payment, though logging in is easier.
2. Enter your PAN and verify with the OTP.
3. Select assessment year 2027-28 for FY 2026-27. This is where most errors happen. The assessment year is the year after the one you earned in.
4. Select minor head 100, Advance Tax. Not 300, which is self assessment tax, and not 400, which is tax on regular assessment.
5. Pay by net banking, UPI, card or at a bank counter.
6. Save the challan. You will need the BSR code, the date and the challan serial number when you file.

Payments show up in your Form 26AS and the Annual Information Statement within a few days. Check that they appear correctly under the right assessment year, because an entry against the wrong year is tedious to correct.

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Common Mistakes

Treating the percentages as additional. By 15 September you need 45 percent cumulative, not another 45 percent on top of June's payment.

Assuming salary TDS is enough. It covers salary. It does not cover interest, dividends, rent or capital gains. If you have any of those, do the calculation.

Ignoring the 90 percent line. People who have missed every deadline sometimes conclude the year is lost and stop trying. It is not. Clearing 90 percent by 31 March avoids section 424 entirely, which is usually the larger of the two charges.

Forgetting the relief bands. If cash is tight in June, paying 12 percent rather than the formal 15 percent costs you nothing in interest. Paying zero costs you 450 rupees per lakh of liability.

Paying under the wrong minor head or year. A payment made against the wrong assessment year is not lost, but reclaiming it involves a correction request and a wait.

Overpaying deliberately. Some people pay extra to be safe. Excess advance tax is refunded with interest under section 244A, but only at 0.5 percent a month, which is half what you are charged. It is not a good place to park money.

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Key Takeaways

• Income tax in India is due four times a year, not once. If your tax after TDS comes to 10,000 rupees or more, you are in the advance tax system whether anyone told you or not.
• TDS rarely covers investors. Banks deduct 10 percent on FD interest against a slab rate that may be 30 percent, and nothing at all is deducted on capital gains from listed shares.
• The section numbers changed from FY 2026-27. Under the Income-tax Act, 2025, sections 234A, 234B and 234C became 423, 424 and 425. The rules did not change.
• Section 424 is the one to fear. Section 425 is capped at roughly 5 percent of your liability, but section 424 runs at 1 percent a month on the whole shortfall from 1 April until you pay, and it does not stop growing.
• The 90 percent threshold is a cliff worth clearing. Paying 91 percent by 31 March avoids section 424 completely. Paying 89 percent triggers it on the entire shortfall.
• Underestimating early is forgiven; ignoring it is not. Twelve percent by 15 June and 36 percent by 15 September waive the interest for those instalments entirely.
• Capital gains buy you timing, not exemption. You may defer the tax on an unforeseeable gain to the following instalment, but the 31 March deadline still applies.

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Try It With Your Own Numbers

Reading about instalments in the abstract is far less useful than seeing what your own schedule looks like. Our advance tax calculator for FY 2026-27 takes your salary, interest, dividends, rent and equity gains, works out the four deadlines, and shows exactly what a missed instalment has already cost and what you need to pay next.

It does three things most calculators do not. It works out your TDS source by source at the rates in the table above, so you do not need Form 26AS to get a usable answer, and you can see exactly which income is leaving a gap. Each rate is editable, because yours may differ: 20 percent on interest if your bank has no PAN on file, 2 percent on rent if your tenant is an individual rather than a business, or nothing at all if you have filed Form 15G. It tells you what catching up from today is worth, in rupees, against doing nothing until you file. And it lets you record when each gain and dividend was booked, so the schedule reflects the section 425 timing relief instead of pretending every rupee was foreseeable in April.

Salary, interest and rent stay annual in both modes, deliberately. The relief does not extend to them, so a bonus landing in March does not move your June deadline, and a tool that implied otherwise would be doing you no favours.

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This guide is educational and covers a resident individual under the new tax regime for FY 2026-27. It does not deal with business or professional income, presumptive taxation, house property losses, virtual digital assets, foreign income or the old regime. Tax situations vary, and anything material is worth checking with a qualified chartered accountant.