What is Advance Tax?

Advance Tax is governed by Sections 207-219 of the Income Tax Act 1961. It operates on a pay-as-you-earn basis: rather than settling the full year's tax liability at filing (typically October), companies estimate their income and pay tax quarterly.

**Who must pay**

Any taxpayer (individual, company, firm) with an estimated tax liability of INR 10,000 or more after TDS credit must pay advance tax. Exception: senior citizens (age 60+) without business income are exempt from advance tax.

**Instalment schedule for companies**

| Instalment | Due Date | Cumulative % of Annual Tax | |------------|----------|----------------------------| | First | 15 June | 15% | | Second | 15 September | 45% | | Third | 15 December | 75% | | Fourth | 15 March | 100% |

Note: For companies opting for presumptive taxation under Section 44AD (turnover below INR 2 crore), the entire advance tax is due in a single instalment by 15 March.

**Calculation**

1. Estimate total income for the year (net of all allowable deductions) 2. Apply the applicable tax rate (including surcharge and cess) 3. Deduct TDS already deducted by payers on income already received 4. The balance is the advance tax payable

If actual income exceeds the estimate, the shortfall must be paid at 15 March or results in interest from that date.

**Interest for default**

- Section 234B: If advance tax paid is less than 90% of assessed tax, interest at 1% per month from 1 April to the date of assessment (self-assessment date) - Section 234C: If any instalment is short-paid, interest at 1% per month for 3 months (1 month for the last instalment)

**Self-assessment tax**

Any balance tax after advance tax and TDS is paid as Self-Assessment Tax (SAT) at the time of filing ITR-6, plus interest under Section 234B for the shortfall period.