Advance tax deadline nears: Third instalment for FY26 due December 15; who must pay now, who can skip

The third instalment of advance tax for the financial year 2025–26 is due on December 15, and taxpayers who fail to pay on time may incur interest and penalties under the Income Tax Act, 1961. Advance tax, often described as “pay-as-you-earn” tax, is collected in instalments through the year to help the government maintain steady revenue inflows and prevent last-minute, large tax payments at the end of the year.

Under the law, advance tax applies to individuals whose estimated net income tax liability exceeds ₹10,000 in a financial year, after factoring in tax deducted at source (TDS). Payments must be made across four instalments:

> 15% by June 15

> 45% by September 15

> 75% by December 15

> 100% by March 15

By the upcoming deadline, taxpayers must have paid at least three-fourths of their projected tax for the year.

This requirement is not limited to high earners or large businesses. Salaried individuals may also fall under advance tax provisions if they earn additional income that is not fully covered by TDS—such as rental earnings, interest income, freelance fees, or capital gains. Self-employed taxpayers, including doctors, lawyers, consultants, freelancers, and chartered accountants, also need to comply.

Who does not need to pay advance tax

Not all taxpayers with liabilities above Rs 10,000 must pay advance tax. The law provides specific exemptions:

Resident senior citizens aged 60 or above are completely exempt, provided they do not earn income from a business or profession.

Salaried individuals whose entire tax obligation is discharged through TDS are not required to pay advance tax, as long as they have no other taxable income.

These provisions ensure that taxpayers who do not have variable or hard-to-predict income streams are not burdened with instalment-based payments.

Special rules

Those who have opted for presumptive taxation must pay their entire advance tax liability in a single instalment by March 15, rather than through four quarterly payments. This approach simplifies compliance for small taxpayers using presumptive schemes under Sections 44AD, 44ADA, or 44AE.

Income categories eligible for deferred advance tax

Certain types of income cannot be predicted in advance, and therefore taxpayers are not required to pay advance tax before these earnings materialise. These include:

Capital gains

Lottery and similar winnings

Income from a newly commenced business or profession

Dividend income (other than deemed dividends)

Taxpayers can pay advance tax on these incomes in the next immediate quarter after the income is earned. Section 234C specifically protects taxpayers from penal interest when precise tax estimation is not feasible due to unpredictable or irregular income.

Avoiding penalties

To avoid interest under Sections 234B and 234C, taxpayers must review their estimated liability, account for TDS, and pay instalments on time. Those benefiting from exemptions or deferred payments must closely track their income timing to remain compliant.

With the December 15 deadline approaching, tax experts recommend completing calculations early to ensure timely payment and avoid unnecessary penalties.