Advance Tax Computation

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What is Advance Tax?

Advance Tax refers to the payment of income tax in instalments throughout the financial year, rather than a lump sum at the end. It's applicable when the total tax liability exceeds ₹10,000 in a financial year after accounting for Tax Deducted at Source (TDS).

Who Needs to Pay Advance Tax?

You are liable to pay Advance Tax if:

Total Tax Liability: Your estimated tax liability for the financial year is ₹10,000 or more after TDS deductions.

Income Sources: You have income from sources where TDS is not applicable or insufficient, such as:

Exemptions

Senior Citizens: Individuals aged 60 years or above, not having income from business or profession, are exempt from Advance Tax.

Salaried Individuals: If your employer deducts the correct amount of TDS, you may not need to pay Advance Tax. However, if you have additional income (e.g., capital gains, interest), you might still be liable.

Advance Tax Payment Schedule for FY 2025-26

Due Date Advance Tax Payable
On or before 15th June 2025 15% of total tax liability
On or before 15th September 2025 45% of total tax liability (cumulative)
On or before 15th December 2025 75% of total tax liability (cumulative)
On or before 15th March 2026 100% of total tax liability

Note : If the entire tax liability is paid by 31st March 2026, it is considered as Advance Tax.

How to Compute Advance Tax?

  1. Estimate Total Income : Calculate your total income from all sources for the financial year.
  2. Compute Tax Liability : Apply the applicable income tax slab rates to your estimated income.
  3. Deduct TDS : Subtract the TDS expected to be deducted from your income.
  4. Calculate Advance Tax : The remaining tax liability after TDS is your Advance Tax, payable as per the schedule above.
Income Range (₹) Tax Rate
Up to 3,00,000Nil
3,00,001 - 6,00,0005%
6,00,001 - 12,00,00010%
12,00,001 - 15,00,00015%
15,00,001 - 20,00,00020%
Above 20,00,00030%

Note : The New Tax Regime is the default, but individuals can opt for the Old Tax Regime if it is more beneficial.

Budget 2025 Updates Affecting Advance Tax

Standard Deduction Increased: The standard deduction under the New Tax Regime has been increased to ₹75,000, reducing taxable income for salaried individuals.

Higher Tax-Free Threshold: Under the New Tax Regime, individuals with income up to ₹2.75 lakh may have zero tax liability after considering the standard deduction.

Simplification of Tax Laws: The proposed Income Tax Bill 2025 aims to simplify tax laws and introduce a unified tax year, replacing the dual financial and assessment year system.

Penalties for Non-Payment or Late Payment

Section 234B: Interest is charged if Advance Tax is not paid or if less than 90% of the total tax liability is paid.

Section 234C: Interest is charged for deferment of Advance Tax installments.

Interest is calculated at 1% per month or part thereof on the shortfall.

How to Pay Advance Tax?

Online: Through the Income Tax Department's e-Payment portal or your bank's internet banking facility.

Offline: By visiting authorized bank branches and filling out Challan No./ITNS 280.

Example Calculation

Scenario:
  • Estimated total income for FY 2025-26: ₹15,00,000
  • Applicable tax (as per New Tax Regime): ₹1,50,000
  • TDS expected: ₹30,000

Advance Tax Liability : ₹1,50,000 – ₹30,000 = ₹1,20,000

Installments:
  • By 15th June 2025: ₹16,875 (15%)
  • By 15th September 2025: ₹33,750 (additional 30% to make 45%)
  • By 15th December 2025: ₹33,750 (additional 30% to make 75%)
  • By 15th March 2026: ₹28,125 (remaining 25% to make 100%)