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Who Needs to Pay Advance Tax? If your total tax liability for Tax Year 2026-27 (after TDS credit) exceeds ₹10,000, you must pay advance tax in quarterly instalments. Salaried individuals typically have TDS deducted by employers — but if you earn additional income (freelance, rent, capital gains, interest), the tax on that income may exceed ₹10,000, triggering the advance tax obligation.
Advance Tax Under Income-tax Act 2025: The Basics
Advance tax provisions are consolidated under Chapter XVII-C of Income-tax Act 2025 (corresponding to Sections 207–219 of the old 1961 Act). The fundamental rule: pay tax in the same year you earn income, not after the year ends.
| Parameter | Rule Under Income-tax Act 2025 |
|---|---|
| Threshold for advance tax | Tax liability (after TDS) exceeds ₹10,000 in a tax year |
| Who is exempt | Senior citizens (60+) with NO business income — pay at time of ITR filing |
| Presumptive taxpayers (Section 58 of new Act / old Sections 44AD/44ADA) | Single instalment due 15 March (100%) |
| Others (individual with side income) | Four instalments: June, September, December, March |
| Tax Year for 2026-27 | April 2026 – March 2027 |
Advance Tax Due Dates for Tax Year 2026-27
| Instalment | Due Date | Cumulative % of Tax | Minimum to Pay |
|---|---|---|---|
| 1st Instalment | 15 June 2026 | 15% | 15% of estimated tax for year |
| 2nd Instalment | 15 September 2026 | 45% | Cumulative 45% (i.e., 30% more) |
| 3rd Instalment | 15 December 2026 | 75% | Cumulative 75% (i.e., 30% more) |
| 4th Instalment | 15 March 2027 | 100% | Balance 25% |
First Instalment Approaching: 15 June 2026 is the first advance tax due date for Tax Year 2026-27. If you expect side income (freelance, rent, capital gains) and total advance tax exceeds ₹10,000, you should estimate and pay by this date.
How to Compute Advance Tax for Side Income
Step-by-Step Computation
1
Estimate total income for the tax year: Salary (net of TDS) + freelance income + rental income + expected capital gains + interest income. Use conservative estimates but be realistic.
2
Compute tax under applicable regime: Apply old or new regime slabs. Add cess (4%) and surcharge if income exceeds ₹50L (10% surcharge) or ₹1 crore (15% surcharge).
3
Deduct TDS already deducted/expected: Employer TDS (from Form 16 estimate) + TDS on interest + TDS on rent (if tenant deducts) + TDS on freelance payments.
4
Net advance tax payable: Total tax – expected TDS = net advance tax. If this exceeds ₹10,000, pay in instalments. If less, pay entire balance as self-assessment tax at ITR filing.
5
Pay via challan ITNS 280: Use income-tax portal → e-Pay Tax → Challan 280 → select "Advance Tax" → Assessment Year 2027-28 → pay via netbanking/UPI.
Side Income Categories and Advance Tax Impact
| Side Income Type | TDS Already Deducted? | Advance Tax Typically Needed? |
|---|---|---|
| Freelance/consulting from Indian companies | 10% TDS on payments >₹30K (Section 393) | Often yes — if multiple clients or high income |
| Rent from property (payer is individual) | No TDS if payer is individual tenant | Yes — rent income is often untaxed at source |
| Rent >₹50K/month (payer is company/LLP) | 2% TDS by tenant (Section 393) | Partial — remaining tax after 2% TDS may still exceed ₹10K |
| Interest from bank FDs | 10% TDS if interest >₹40K/year | Sometimes — if in 20-30% bracket, short-paid TDS creates gap |
| LTCG on equity (sold at a profit) | No TDS on listed equity | Yes — no TDS; entire LTCG tax must be paid via advance tax |
| STCG on equity (short-term trades) | No TDS | Yes — particularly for active traders |
| Online business / e-commerce income | 1% TDS by aggregator (e.g., Amazon, Flipkart) | Yes — 1% TDS insufficient; pay balance via advance tax |
| YouTube/social media monetisation | No TDS (typically) | Yes — entire tax liability via advance tax |
| Dividend income | 10% TDS if >₹5K | For high dividend income, top-up advance tax needed |
Case Study: Ananya Iyer — Salaried Software Engineer + Freelance Income
Income Profile (TY 2026-27 Estimate)
- Salary: ₹14,00,000 (TDS by employer ~₹1,10,000)
- Freelance (US clients, no TDS): ₹4,00,000
- FD interest: ₹60,000 (TDS 10% = ₹6,000)
- LTCG on equity MF: ₹1,50,000 (no TDS)
- Total income: ₹19,60,000
Tax Computation (New Regime)
- Salary after SD ₹75K: ₹13,25,000
- Freelance: ₹4,00,000
- FD interest: ₹60,000
- Total slab income: ₹17,85,000
- Tax on ₹17.85L (new slabs): ~₹2,35,500
- LTCG (₹1.5L – ₹1.25L) = ₹25,000 × 12.5% = ₹3,125
- Total tax + cess (4%): ~₹2,48,635
TDS Credits Expected
- Employer TDS: ₹1,10,000
- FD TDS: ₹6,000
- Freelance TDS (if clients deduct): NIL (US clients)
- Total TDS: ₹1,16,000
- Net advance tax payable: ₹2,48,635 – ₹1,16,000 = ₹1,32,635
Advance Tax Schedule
- 15 June 2026: 15% = ₹19,895
- 15 Sep 2026: 30% more = ₹39,791
- 15 Dec 2026: 30% more = ₹39,791
- 15 Mar 2027: 25% balance = ₹33,159
- Total: ₹1,32,636 ✓
Penalties for Non-Payment of Advance Tax
| Section (New Act) | Provision | Interest Rate | Period |
|---|---|---|---|
| Section 234B | Default in payment of advance tax (paid <90% of tax by 31 March) | 1% per month (simple) | April to date of assessment |
| Section 234C | Deferment of advance tax instalments | 1% per month (simple) | 3 months for each short-paid instalment |
| Section 234A | Delay in filing ITR | 1% per month | From due date of filing to actual filing |
234C Interest is Avoidable: Section 234C interest applies per instalment. If you pay 15% by 15 June, 45% by 15 Sep, 75% by 15 Dec, and 100% by 15 March — no 234C interest. Missing any instalment costs 1% per month on the shortfall for 3 months. On a ₹1L shortfall, this is ₹3,000 per quarter — avoidable with good planning.
Capital Gains and Advance Tax: Special Rule
Capital gains are often unpredictable — you may sell a property in December 2026 that generates unexpected gains. The Act provides a partial relief:
| Situation | Rule |
|---|---|
| Capital gain arises after the due date of an instalment | The gain is included in the remaining instalments proportionately — you are not penalised for not including it in earlier instalments |
| Capital gain arises in Q4 (after 15 Dec) | Include entire gain in the 15 March instalment; pay tax by 15 March to avoid 234C |
| LTCG on equity exceeds ₹10K after March 15 | Pay as self-assessment tax before filing ITR — 234B applies from April 1 |
Presumptive Taxation and Advance Tax
If your side income falls under presumptive taxation (Section 44AD for business or 44ADA for professionals), the advance tax rules are different:
| Scheme | Applicable To | Advance Tax Rule |
|---|---|---|
| Section 44AD | Small business (turnover <₹3 crore) | Single instalment by 15 March — 100% |
| Section 44ADA | Professionals (receipts <₹75 lakh) | Single instalment by 15 March — 100% |
| Other business income | Turnover above thresholds | Four-instalment schedule (June/Sep/Dec/Mar) |
44ADA Advantage: Freelancers and consultants with gross receipts under ₹75 lakh who opt for Section 44ADA can pay their entire advance tax in a single instalment by 15 March 2027 — instead of the four-instalment schedule. This simplifies compliance significantly.
✅ Key Takeaways for Side Income Earners
- Advance tax applies if net tax liability (after TDS) exceeds ₹10,000 in a year
- Four instalments: 15% by 15 Jun, 45% by 15 Sep, 75% by 15 Dec, 100% by 15 Mar
- Senior citizens without business income are exempt — pay full tax at self-assessment
- Section 44ADA freelancers/consultants (receipts <₹75L) can pay in a single March instalment
- Capital gains arising after an instalment date are pro-rated to remaining instalments
- Interest at 1% per month under Section 234B/C is simple and avoidable with proper planning
- Pay via Challan 280 (ITNS 280) on income-tax portal — Assessment Year 2027-28
Frequently Asked Questions
I'm salaried — does advance tax apply to me?+
If your employer deducts TDS that covers your full tax liability, no advance tax applies. But if you have side income (freelance, rent, capital gains, FD interest at higher slab than TDS deducted) and the net tax after TDS exceeds ₹10,000, you must pay advance tax. Check your estimated total tax and compare with expected TDS by June.
What is the Assessment Year for Tax Year 2026-27?+
Under Income-tax Act 2025, the concept of "Previous Year" and "Assessment Year" is replaced by a single "Tax Year." Tax Year 2026-27 covers April 2026 to March 2027. When paying via Challan 280, select Assessment Year 2027-28 (which corresponds to Tax Year 2026-27 in the old portal terminology, maintained for continuity).
I forgot to pay the June instalment — what do I do?+
Pay it as soon as possible. Section 234C interest is charged at 1% per month on the shortfall for 3 months from the due date of that instalment. So if you missed 15 June (15% due), pay the combined amount by 15 September along with the Sep instalment. The interest on the missed June instalment will be added at the time of ITR processing. You cannot be prosecuted for advance tax default — only interest applies.
Is there a way to estimate my tax without a CA?+
Yes. Use the income-tax calculator on income-tax portal (incometaxindia.gov.in → Tax Tools → Tax Calculator) or the Finin2min Tax Calculator. Enter estimated income from all sources, choose regime, get estimated tax. Deduct employer TDS (from projected Form 16) to get advance tax due. Divide by instalment percentages for each quarter's payment.