Advance Tax Advisory
Estimating and tracking advance tax instalments through the year.
Reviewed before each instalment date — June, September, December and March
Advance tax is the requirement to pay tax as income is earned rather than after the year ends. Where the liability for the year, after credit for tax deducted at source, crosses the prescribed threshold, it must be paid in instalments on specified dates.
Missing or underpaying an instalment does not attract a penalty, but it does attract interest — and because that interest runs from the instalment date, it accumulates quietly until the return is filed.
How the instalments work
The liability is paid in four instalments across the year, each requiring a cumulative percentage of the estimated annual tax to have been paid by that date. Interest under section 234C applies where an instalment falls short; interest under section 234B applies where the total paid through the year falls short of the threshold.
Senior citizens without business income are not required to pay advance tax, and taxpayers under a presumptive scheme have a single instalment rather than four.
Estimating when income is uncertain
The difficulty with advance tax is that it requires an estimate of a year that has not finished. For a salaried person that is straightforward; for a business with variable income, or for someone with capital gains, it is not.
The practical approach is to revise the estimate at each instalment date on the figures then available, and to recognise that capital gains are treated differently — the shortfall attributable to a gain arising after an instalment date is not penalised, provided it is paid in the remaining instalments.
Who needs this
- Businesses and professionals whose tax liability crosses the threshold
- Salaried individuals with substantial income outside salary
- Individuals with capital gains or rental income
- Anyone who has previously paid interest under sections 234B or 234C
Eligibility and conditions
- An estimated tax liability above the prescribed threshold after TDS credit
- Income details available at each instalment date
- A PAN for making the payment
What this covers
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Liability estimated
Projected for the year on the figures available.
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Instalments computed
The amount due at each date, with the cumulative test applied.
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Reminders
A reminder before each instalment date.
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Re-estimation
The projection revised as the year progresses.
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Challan support
Payment details prepared so the deposit is made correctly.
How the process works
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Estimate income
Projected income for the year from all sources.
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Compute liability
Tax estimated, with credit for tax deducted at source.
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Schedule instalments
The amount due at each of the four dates.
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Remind and pay
Reminder before each date, with challan details.
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Revise
Estimate updated at each date on current figures.
Documents required
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Previous year's return
As a starting point for the estimate.
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Income figures to date
For the current year, at each instalment date.
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TDS details
Tax already deducted, from Form 26AS.
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Details of capital gains
Where gains have arisen during the year.
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Expected income for the balance year
Your own estimate of what remains.
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Previous challans
For instalments already paid this year.
The list above is indicative. Additional documents may be required depending on your case and the current departmental requirements.
Frequently asked questions
Do I need to pay advance tax?
If your estimated tax liability for the year, after credit for tax deducted at source, crosses the prescribed threshold, advance tax is payable in instalments on specified dates.
Missing an instalment does not attract a penalty, but interest runs from the instalment date and accumulates quietly until you file. Senior citizens without business income are not required to pay advance tax.
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Unsure what advance tax you owe?
Share your income position and we will compute the instalment due and by when.