When it comes to paying taxes, most people have a frown on their face, and this is not just because they have to make a payment, it is also because many of them do not understand how ‘taxes’ work and how they are to be paid. If you too are someone who is trying to figure out what advance tax payment is and how it works, read on. In this article, everything about advance income tax will be discussed. 

What is advance tax payment?

By the term itself, it is quite clear that advance tax payment means the prepayment of your tax liabilities. This means that before the fiscal year ends, you have already cleared your tax. Advance tax payment is also called pay-as-you-earn tax. This kind of tax is payable when your tax-paying ability exceeds INR 10,000 in a given financial year. Paid in the form of an EMI, there are ways in which you can make the most of it, however, for that you need to understand all about advance tax payment and familiarise yourself with its components. Here are the key features of advance tax payment:

  1. Advance tax payment is also called pay-as-you-earn tax
  2. This kind of tax is paid before the financial year comes to an end
  3. The tax is to be paid in the same year in which the income is accepted
  4. Advance tax is paid by people who have other sources of income such as rent from property, interest on fixed deposits, lottery winnings, capital gain from the capital market etc.
  5. Advance tax payment online has made this process all the more convenient 
  6. The taxpayer who makes an advance tax payment has a tax liability over INR 10,000

Who is liable to pay advance tax?

As explained earlier, if you have a tax liability that exceeds INR 10,000 after the adjustment of TDS in a financial year, you need to pay advance tax. This includes:

  1. Professionals, freelancers and salaried employees
    Such individuals who have a tax liability of over INR 10,000 need to pay the tax in advance. This includes the income from property, interest on fixed deposits, lottery winnings, capital gain from the capital market etc.
    Citizens over the age of 60 years and do not run their own business do not have to pay advance tax.
  2. Professionals with Presumptive Income
    Doctors, architects, lawyers and other independent professionals fall under the purview of the tax regime under Section 44ADA. If you are in this category you would pay the complete tax liability in one instalment on March 15 or before that. You can also pay the entire amount due by March 31.
  3. Businesses with Presumptive Income
    When a taxpayer opts to pay a presumptive tax regime under section 44AD, they have to pay the complete tax liability in a single installment either on or before March 31.

How to pay Advance Tax online?

Here’s how to carry out the process of advance income tax payment through online mode:

  1. Log on to the Income Tax department’s online portal for tax payment or click on https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
  2. Choose the applicable challan number. For example, challan number 280 is to be selected for the individual taxpayers of advance Tax.
  3. Choose the type of payment as ‘Advance Tax’
  4. Fill in the details including mode of payment, address, email id, phone number, bank name, assessment year, etc.
  5. Click on ‘Proceed’ and make the advance income tax payment on the online payment portal.
  6. Download and save the payment challan as you may require it to file Income Tax returns.

In case you wish to pay the advance tax offline, you can submit your challan at an authorised bank office of the IT Department. No matter which method of payment you choose, make sure that you compute the tax correctly and make a timely payment. 

Instalment of advance income tax due date:

  1. For Self-Employed Individuals and Business-Owners

    Serial

    Due Date

    Amount to be paid

    1

    On or earlier than September 15

    Minimum 30% of your liability for advance tax

    2

    On or earlier than December 15

    Minimum 60% of your liability for advance tax

    3

    On or earlier than March 15

    100% of your liability for advance tax

  2. For Companies

    Serial

    Due Date

    Amount to be paid

    1

    On or earlier than June 15

    Minimum 15% of your liability for advance tax

    2

    On or earlier than September 15

    Minimum 45% of your liability for advance tax

    3

    On or earlier than December 15

    Minimum 75% of your liability for advance tax

    4

    On or earlier than March 15

    100% of your liability for advance tax

What to do if the deadline for advance tax payment is missed? 

Paying less than your amount due or not paying the tax amount on time would attract a monetary fine for you. This fine/ penalty can be the interest of 1% of the remaining tax liability for every month. This penalty is paid under Sections 23 4B and 23 4C of the Income Tax Act, 1961. 

If you have not paid the advance income tax so far, you should do so at the earliest.

What is Advance Tax Challan 280?

An easy way to make your advance income tax payment, pay self-assessment tax, regular assessment tax or additional charges is through Advance Tax Challan 280. You can avoid relying on your Chartered Accountant or any other agent to pay your taxes. 

When you visit the website of the Income Tax department to pay your income tax, you need to select this challan and pay your taxes. In case you are paying the taxes offline, you would have to download the Challan 280. Once you fill it and submit it to an authorised bank. 

How to calculate advance income tax payment with steps?

To prevent yourself from landing into any legal consequences, you must know how to calculate and pay your Advance Tax properly. Read on to find out how easily your Advance Tax liability can be calculated:

  1. Advance tax is calculated on the estimated income of an individual earned by him in a fiscal year. The taxpayer must include his revenue from other sources such as rental income, interest income, capital gains, professional income, and others.
  2. In the next step, the taxpayer needs to calculate the gross taxable income by simply summing up his salaried and non-salaried income, for the year. The individual should be known to the fact that both the salaried and non-salaried revenues added together can raise his Advance Tax liability.
  3. Refer to the Income latest tax slab to compute your payable Advance tax amount.
  4. Estimate the TDS amount to be deducted as per the eligible tax slab and subtract it from the payable amount.
  5. In case the Advance Tax liability exceeds INR 10,000 post the deductions of TDS, you should refer to the norms of Advance Tax Payment.

What is an Advance Tax calculator?

The Advance tax calculator is an online tool provided by the Income Tax Department of India to give taxpayers an easy hand in the calculation of their payable tax liability. Advance Tax calculator makes tax calculation quick and easy for individuals and businessmen. 

Major benefits of using advance income tax payment calculator tool:

  1. Easy-to-use intuitive tool
  2. Calculates your Advance Tax Liability with accuracy.
  3. Being an online tool, this can be availed easily by all.
  4. Calculates your payable tax amount in just a few minutes.

Here’s an example to understand how Advance Tax works:

Mr Rupesh Kothari is a 32-year-old male who is a professional e-book writer and earns his living by freelancing. Given below are his earnings and spending for the FY 2019-20:

His Gross receipts for the year

INR 20,00,000

His expenses

INR 12,00,000

Life insurance premium

INR 25,000

Medical Insurance Premium

INR 12,000

The amount deposited in his PPF account

INR 40,000

The estimated amount of TDS applicable

INR 30,000

The interest expected from Fixed Deposits 

INR 10,000

What will be the Advance Tax Liability?

Let us now see Rupesh Kothari’s advance tax liability

Income Estimation for Advance Tax

Amount in INR

Amount in INR

Income from the profession:

   

Gross receipts

20,00,000

 

Less: expenses

12,00,000

800,000

     

Income from external sources

   

Interest from Fixed deposit

 

10,000

GROSS TOTAL INCOME

 

810,000

Less: Deductions

   

PPF contribution

40,000

 

Term Insurance Premium

25,000

 

Medical Insurance Premium

12,000

77,000

TOTAL INCOME

 

7,33,000

Tax Payable

 

59,100

Add: 4% education cess

 

2364

     

Less: TDS

 

30,000

Advance Tax Payable

 

31,464

 

Due Date

Advance Tax to be Paid

Amount in INR

On or before June 15

15% of advance tax liability

4,700

On or before September 15

45% of advance tax liability

14,100

On or before December 15

75% of advance tax liability

23,600

On or before March 15

100% of advance tax liability

31,400

Exemption in advance tax payments:

The following individuals are exempted from paying the Advance Tax:

  1. Senior citizens (individuals over the age of 60 years)
  2. Salaried employees who fall in the TDS net, however, the income from capital gains, interests of FDs, rent from the property will be eligible for an advance tax
  3. If the TDS, Tax Deducted at Source, is higher than the payable tax, then you need not pay 

What are the penalties for those who fail to make Advance Tax Payments?

As a taxpayer, you must know that if you fail to make payment for your Advance tax Liabilities or make payment of a lower amount than estimated, you would be charged with a penalty under Section 23 4B and 23 4C of Income Tax Act, 1961.

These points would help you understand the penalties more clearly:

  1. If the individual fails to make the payment on his first due date, he will be charged interest on the remaining sum at a 1% rate on the amount for each month.
  1. In case the individual fails to pay the advance tax liability for the second due date, the same interest penalty will continue to be charged.
  1. If the taxpayer misses the payment of the liability for the third due date too, he will be charged 1% S.I for each month until the whole amount is cleared.

An example is illustrated below to show the calculation of penalties on the account of an individual making a partial payment.

Assuming the total Advance Tax liability for the financial year to be INR 100,000 and no TDS applicable. 

Payment Dates

Advance Tax Payable in INR

Total Advance Tax Paid in INR

Shortfall in INR

Penalties in INR

15th June

15,000

5,000

10,000

@1*3*10,000= INR 300

15th September

45,000

25,000

20,000

@1*3*20,000= INR 600

15th December

75,000

35,000

40,000

@1*3*40,000= INR 1,200

15th March

1,00,000

50,000

50,000

@1*50,000= INR 500

Total Interest payable:

INR 2,600

Refund in Advance Tax Payment:

In case any discrepancy is found between the tax that has been paid by you and the amount that actually payable, an Income Tax refund will arise, and the difference will be refunded to you. This is stated under Sections 237 and 245 of the Income Tax Act, 1961. 

When the return of your income is filed, you can avail of a tax refund. Unless extended, the filing of ITR, Income Tax Returns, has to be done by 31 July.

To check if you are eligible for a Refund in Advance Tax Payment, check the following criteria. You can ask for a refund if:

  1. You have paid the self-assessed advance tax, but it is more than the regular assessed tax
  2. The TDS from your income is higher than the actual tax that is payable
  3. The tax that has been charged on the basis of regular assessment has been reduced due to an error in the assessment
  4. The income has already been taxed in a foreign nation, with whom there is an agreement of the Indian Government.

FAQ’s

Advance tax payment means that you make a prepayment of your tax. This means that before the financial year ends, you clear your tax liabilities. Advance tax payment is payable when your tax-paying ability exceeds INR 10,000 in a given fiscal year.


In case your total tax liability is over INR 10,000, you need to make the advance tax payment. Individuals who are over the age of 60, and do have a business in their name are exempt from this tax.


In order to claim a refund, you need to declare your investments. This can be done when you are filing your returns, through Form 16. You can raise a claim for children’s tuition fee, house rent that is being paid, bank FDs etc.