Advance Tax in India Under the New Tax Regime

Topic Category: Compliance And Notices

Advance tax is an important part of the Indian income tax system because taxpayers are required to pay tax as they earn income during the year, instead of paying the entire amount at the time of filing the return.

Under the new tax regime, advance tax planning becomes even more relevant. Since most deductions are not available, taxable income is closer to gross income, which means taxpayers must estimate their income and tax liability carefully throughout the year.

Paying advance tax on time also helps avoid interest charges under Sections 234B and 234C and ensures better cash-flow management. Learn more about computation of interest under section 234C

Advance tax is especially relevant for freelancers, consultants, business owners, and salaried individuals who earn income from sources such as capital gains, interest, or rental income in addition to their salary.

Let us understand what Advance Tax is

Advance tax refers to the payment of income tax in instalments during the financial year, based on the estimated income for that year.

Instead of paying the entire tax liability at the end of the year, taxpayers are required to pay tax progressively according to the advance tax schedule.

Advance tax becomes applicable when:

The total tax liability exceeds ₹10,000 in a financial year after considering TDS (Tax Deducted at Source).
Income is earned from business, profession, capital gains, interest, rent, or other sources where sufficient TDS may not be deducted.

If the tax liability crosses this threshold, the taxpayer must pay advance tax in quarterly instalments.

Why Advance Tax Matters Under the New Tax Regime

Under the new tax regime, most deductions and exemptions available in the old regime are not allowed. As a result, the taxable income is often higher compared to the old regime.

Because of this:

Tax liability becomes easier to estimate but may be higher.
Missing an instalment can lead to interest charges.
Regular advance tax payments help distribute the tax burden across the year instead of creating a large payment at year-end.

For professionals and businesses with fluctuating income, advance tax payments also help maintain better financial discipline.

Interest for Non-Payment of Advance Tax

The Income Tax Act imposes interest penalties if advance tax is not paid correctly or on time. The two main provisions applicable are Section 234B and Section 234C.

Navigate to calculate interest under section 234B and 234C

Interest under Section 234B - Default in Payment of Advance Tax

Section 234B applies when a taxpayer fails to pay advance tax or when the advance tax paid during the year is less than 90% of the total tax liability.

In such cases:

Interest is charged at 1% per month or part of a month.
The interest is calculated from 1 April of the assessment year until the date of tax determination.
The calculation is based on the amount of unpaid tax after considering TDS and advance tax already paid.

This provision ensures that taxpayers pay the majority of their tax liability during the financial year itself.

Interest under Section 234C - Deferment of tax payment on due dates for Advance Tax Instalments

Check out due dates for Advance Tax Instalments

Under section 234C, interest is levied for delay or shortfall in advance tax instalments. Learn more about computation of interest under section 234C

Advance tax must be paid according to the prescribed schedule during the financial year. If the taxpayer pays less than the required percentage by the due dates, interest may be charged on the shortfall.

However, the law provides certain relief. If the shortfall occurs because of income that is difficult to estimate in advance--such as capital gains or lottery income--interest may not be levied provided the tax is paid in the remaining instalments of the financial year.

Amendment

Under Section 234C, although advance tax instalments are required to be 15% and 45% by 15 June and 15 September respectively, interest for deferment is not levied if the taxpayer has paid at least 12% and 36% of the assessed tax by those dates. The balance can be paid in subsequent instalments according to the prescribed schedule.

Navigate to understand how provisions in this amendment work.

Learn How To Calculate Advance Tax Under the New Regime

Advance tax calculation requires estimating your annual income and computing the expected tax liability.

Navigate to calculate total tax on your total income in case of ITR 1.

Navigate to calculate total tax on your total income in case of ITR 2 which handles salary with capital gains.

Navigate to calculate total tax on your total income in case of ITR 4 which handles salary income and/or presumptive income.

The basic steps are as follows.

Estimate Total Annual Income

Include all sources of income such as:

Salary
Business or professional income
Rental income
Interest income
Capital gains
Other income

Apply Deductions Allowed in the New Regime

Although most deductions are not available, a few deductions are still permitted, such as:

Standard deduction of ₹75,000
Employer's contribution to NPS under Section 80CCD(2)
Contribution to the Agniveer Corpus Fund

Apply the New Regime Tax Slabs

Once taxable income is determined, apply the slab rates applicable under the new tax regime to estimate total tax liability.

Adjust TDS

Reduce the estimated tax liability by the TDS already deducted by employers, banks, or clients.

Pay the Remaining Tax as Advance Tax

The balance tax liability should then be paid according to the advance tax instalment schedule.

Advance Tax Due Dates in India

Advance tax must be paid in four instalments during the financial year.

The prescribed schedule is:

15 June - At least 15% of total tax liability
15 September - At least 45% of total tax liability
15 December - At least 75% of total tax liability
15 March - 100% of total tax liability

Taxpayers should review their income before each instalment and revise their estimates if income changes during the year.

Advance Tax Planning Strategies Under the New Regime

Even though deductions are limited under the new regime, certain planning strategies can help reduce or manage advance tax liability.

Use NPS Contributions Efficiently

Employer contributions to the National Pension System under Section 80CCD(2) remain deductible under the new tax regime. Structuring salary to include this component can reduce taxable income.

Claim Legitimate Business Expenses

Freelancers and professionals can reduce taxable income by claiming valid business expenses such as:

Software subscriptions
Office rent
Internet and mobile expenses
Depreciation on laptops and equipment
Cloud hosting and domain costs
Travel for business purposes

These expenses directly reduce business income and remain fully allowable under the new regime.

Consider Presumptive Taxation

Eligible professionals and businesses may opt for presumptive taxation.

Section 44ADA - Professionals with turnover up to ₹75 lakh can declare 50% of receipts as income.
Section 44AD - Businesses with turnover up to ₹3 crore can declare 6% or 8% of turnover as income.

For taxpayers opting for presumptive taxation, advance tax rules are simpler. Instead of quarterly payments, 100% of advance tax can be paid by 15 March.

Manage Capital Gains Timelines

Navigate to this page to learn more on exemptions against capital gains.

Learn How to Maximize Capital Gains in 2026.

Capital gains may arise unpredictably during the year. Taxes on capital gains should ideally be paid in the advance tax instalment corresponding to the quarter in which the gains arise.

Learn How Capital Gains Are Taxed In India.

Taxpayers can manage their liability by:

Offsetting gains with capital losses
Using exemptions such as Section 54 or 54EC for property gains
Planning the timing of asset sales

Common Mistakes to Avoid

Many taxpayers face interest charges simply because of small calculation errors. Some common mistakes include:

Ignoring interest income from bank deposits
Not accounting for bonuses or variable salary components
Forgetting rental or consulting income
Assuming employer TDS covers the entire tax liability
Delaying tax payment on capital gains

Regular review of income during the year can prevent these issues.

A Simple Framework to Stay Compliant

Taxpayers can manage advance tax efficiently by following a simple process:

Estimate income at the beginning of the financial year.
Recalculate income before each advance tax due date.
Track TDS from employers, banks, and clients.
Adjust instalments if income changes due to bonuses or business receipts.
Keep a small buffer while estimating tax liability.

This approach helps avoid both interest charges and last-minute tax payments.

FAQs on Advance Tax in India

Q. Who needs to pay advance tax?

A. Any taxpayer whose total tax liability exceeds ₹10,000 in a financial year after considering TDS must pay advance tax.
Q. On which dates are the advance tax installments due?

A. Advance tax is paid in four instalments:

15 June - 15%
15 September - 45%
15 December - 75%
15 March - 100%
Q. Can salaried employees be required to pay advance tax?

A. Yes. Salaried employees may need to pay advance tax if they earn additional income such as capital gains, rental income, or interest income that is not fully covered by employer TDS.
Q. How can a taxpayer pay advance tax online?

A. Advance tax can be paid through the Income Tax Department's e-filing portal using Challan ITNS 280, by selecting the advance tax option.
Q. What happens if advance tax is not paid on time?

A. Failure to pay advance tax or paying less than the required amount may lead to interest charges under Sections 234B and 234C.
Q. Do senior citizens have to pay advance tax?

A. Resident senior citizens who do not have business or professional income are generally exempt from paying advance tax.
Q. Can advance tax estimates be revised?

A. Yes. Taxpayers can revise their income estimates and adjust the remaining instalments if income increases during the year.

Final Thoughts

Under the new tax regime, advance tax is less about maximizing deductions and more about accurately estimating income and paying taxes on time. By monitoring income regularly and planning instalments properly, taxpayers can avoid interest charges and maintain smoother cash-flow throughout the year.