Advance Tax simplified for all taxpayers: Who needs to pay it and when

ITR filing 2026: Many taxpayers believe that once tax has been deducted at source (TDS), they have no further tax obligations during the financial year. While this is often true for individuals who earn only a salary, those with additional income—such as interest from fixed deposits (FDs), rental income, capital gains or freelance earnings — may still be required to pay advance tax.

Advance tax is a system under which taxpayers pay income tax in installments during the financial year instead of making a lump-sum payment while filing their income tax return. The objective is to ensure a steady flow of tax revenue to the government and reduce the burden of a large payment at the end of the year.

Tax deducted at source (TDS), on the other hand, applies to several financial transactions, including the sale of property, transfers of virtual digital assets, and interest earned on fixed deposits beyond prescribed thresholds. If TDS has been deducted, taxpayers are generally required to file their income tax return (ITR) to either declare the related income and settle their tax liability or claim a refund of excess tax deducted. Failing to file the ITR despite TDS deductions may invite scrutiny or other action from the Income Tax Department.

Who needs to pay advance tax?

According to Alok Agrawal, Partner, Deloitte India, salaried employees are often confused about whether they are liable to pay advance tax.

"As far as salary is concerned, the employer has the obligation to deduct TDS on the entire salary. If the employer has calculated the correct amount of TDS on the salary, then there will be no additional tax liability on the salary," Agrawal explained.

However, the situation changes when taxpayers earn income from sources that are either not subject to TDS or where TDS is deducted at a lower rate than the applicable income tax rate.

For instance, banks generally deduct TDS at 10% on FD interest once the prescribed threshold is crossed. But if the taxpayer falls in the 30% tax bracket, the remaining tax liability still needs to be paid.

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"That balance amount between the tax liability and the TDS... is required to be paid by the taxpayer through advance tax," Agrawal said.

The ₹10,000 rule

Advance tax becomes mandatory if the total tax payable during a financial year, after reducing TDS and other tax credits, is ₹10,000 or more.

For example, if your total tax liability works out to ₹1.5 lakh and TDS already deducted amounts to ₹50,000, the remaining ₹1 lakh cannot simply be paid while filing the income tax return. It should be discharged through advance tax installments during the year.

Agrawal noted that the ₹10,000 threshold has been prescribed so that taxpayers with very small additional liabilities are not required to pay advance tax.

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When should advance tax be paid?

Advance tax is generally paid in four installments during the financial year:

June 15: At least 15% of total advance tax
September 15: At least 45% cumulatively
December 15: At least 75% cumulatively
March 15: 100% of the advance tax liability

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Missing these deadlines or underestimating income could attract interest under Sections 234B and 234C of the Income-tax Act.

Tax experts advise taxpayers to periodically review all sources of income—not just salary—throughout the year. Tracking FD interest, rental income, dividends and capital gains can help estimate tax liability early, avoid penalties and prevent last-minute surprises while filing the income tax return.