Advance Tax and Self-Assessment Tax — Who Pays, When, and How Much

Introduction

Income tax is not only paid once a year at filing time. If your tax liability is large enough, the law expects you to pay it as you earn — in instalments through the year. This is advance tax, and missing it triggers interest.

This article explains who has to pay advance tax, the due dates and percentages, how to estimate the amount, and how self-assessment tax settles any balance when you file. Getting this right avoids interest under Sections 234B and 234C and an unwelcome surprise at filing.

Who Must Pay Advance Tax?

You are liable to pay advance tax if your total tax liability for the year, after reducing TDS/TCS, is ₹10,000 or more.

This commonly applies to:

• Self-employed professionals and freelancers
• Business owners and partners
• Salaried individuals with significant income outside salary — rent, capital gains, interest, dividends, or freelance income — where TDS does not cover the full liability
• Anyone with large one-off gains, such as the sale of property or shares

Exemption: A resident senior citizen (60+) who has no income from business or profession is not required to pay advance tax.

The Four Due Dates

Advance tax is paid in four instalments. By each date, a cumulative percentage of your estimated annual tax must be paid:

These are cumulative — by 15 September you should have paid 45% in total, not an additional 45%.

Note: Taxpayers who have opted for the presumptive taxation scheme (Sections 44AD / 44ADA) pay their entire advance tax in a single instalment by 15 March.

How to Calculate Advance Tax

The process is a forward estimate of the full year:

1. 1Estimate your total income for the financial year from all sources — salary, business, capital gains, rent, interest, and so on.
2. 2Compute the tax on that income using the applicable slab rates and your chosen regime.
3. 3Subtract TDS and TCS already deducted on your income.
4. 4The balance is your advance tax — pay it across the four instalments in the prescribed percentages.

Because income like capital gains or a bonus can be hard to predict, you revise the estimate at each instalment and adjust the payment.

Interest for Default — Sections 234b and 234c

Missing or underpaying advance tax attracts interest at 1% per month.

Section 234C — deferment of instalments:

Charged when you pay less than the required cumulative percentage by any instalment date. It is calculated instalment by instalment for the period of the shortfall.

Section 234B — failure to pay 90%:

Charged when the total advance tax paid during the year is less than 90% of the assessed tax. It runs from 1 April of the assessment year until you pay the balance.

Both can apply together, which is why even a rough but timely estimate is better than paying nothing until filing.

What is Self-assessment Tax?

After the financial year ends, you finalise your actual income and tax. If your TDS plus advance tax still falls short of your final liability, the remaining amount is self-assessment tax, paid before you file your return.

In short:

• Advance tax is paid *during* the financial year, on estimated income
• Self-assessment tax is paid *after* the year ends, to clear the final balance before filing

You cannot file a valid return until any self-assessment tax (and applicable interest) is paid.

How to Pay

Advance tax and self-assessment tax are both paid online through the Income Tax Department's e-filing portal (the e-Pay Tax facility), using Challan 280 / ITNS 280. Select the correct assessment year and the correct head — "Advance Tax (100)" or "Self-Assessment Tax (300)" — so the payment is credited correctly against your account.

Common Mistakes to Avoid

Mistake 1: Assuming TDS covers everything.

Salaried taxpayers with rental income, capital gains, or interest often find TDS does not cover the full liability — and become liable for advance tax without realising it.

Mistake 2: Treating the percentages as separate instalments.

The figures are cumulative. By 15 December you must have paid 75% in total, not 75% on top of earlier payments.

Mistake 3: Ignoring a large one-off gain.

A property or share sale can create a big liability in a single quarter. Advance tax on that gain is due in the instalment(s) following the sale.

Mistake 4: Selecting the wrong challan head or assessment year.

Paying under the wrong head or year leads to the credit not showing against your return — and avoidable notices.

Key Takeaways

• Advance tax applies if your tax after TDS is ₹10,000 or more for the year
• Pay in four cumulative instalments: 15% by 15 Jun, 45% by 15 Sep, 75% by 15 Dec, 100% by 15 Mar
• Resident senior citizens without business income are exempt
• Underpayment triggers interest at 1% per month under Sections 234B and 234C
• Self-assessment tax clears any remaining balance and must be paid before you file
• Pay through the e-filing portal using Challan 280, with the correct head and assessment year

When to Seek Professional Help

Estimating advance tax accurately — especially with variable income, capital gains, or multiple sources — is where many taxpayers slip up and end up paying interest. A CA can project your annual liability, schedule the instalments, adjust for one-off gains, and make sure every challan is credited correctly so your return goes through cleanly.