Advance Tax in India (Tax Year 2026-27): Due Dates, the Capital Gains Rule, and the Interest Traps
Written by
Kashish Manjani
- Blog
- Financial Planning
Date
08 September 2026
YouTube
You sold a property in November. Your accountant mentions advance tax in January. You assume you have missed three instalments and are staring at interest on all of them.
You are probably not. There is a specific relief for exactly this situation, and most advanced tax articles do not mention it.
That relief, and three others like it, are the useful parts of this subject. The due dates are the easy part.
The short version. Advance tax applies if your estimated tax for the year, after TDS and TCS, is ₹10,000 or more. It is paid in four instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March, all cumulative. Capital gains, dividend income, and first-time business income are still taxable on that schedule, but Section 425(4) can protect you from deferment interest on them. Resident senior citizens with no business or professional income are outside advance tax altogether.
For Tax Year 2026-27, the framework sits under the Income-tax Act, 2025, which replaced the 1961 Act and introduced “Tax Year” in place of the old previous-year and assessment-year pair. The substance of advance tax has not changed. The section numbers have.
Who has to pay, and who does not
Advance tax is payable where your estimated tax for the year, after allowing for TDS and TCS, comes to ₹10,000 or more.
That typically pulls in:
- Business owners and professionals
- Freelancers and consultants
- Anyone with a meaningful interest or rental income
- Investors realising taxable capital gains
- Anyone whose income has not had enough tax deducted at source
The test is your estimated tax liability, not your gross income. A salaried person whose employer deducts correctly usually has nothing to pay. The same person who sells equity in September usually does.
The senior citizen exemption most articles skip
A resident individual aged 60 or above during the year, with no income from business or profession, is not liable to pay advance tax at all.
Not a reduced rate. No advance tax. They settle the whole liability as self-assessment tax before filing.
This matters more than it sounds. A retired parent with a large fixed deposit book, rental income and equity gains can look like a textbook advance tax case and owe nothing under this schedule.
Two conditions, and both bite:
- Resident. An NRI aged 65 does not get this. Residential status is the gate, not age.
- No business or professional income. A retired consultant taking occasional assignments loses it.
The due dates
| Due date | Cumulative advance tax payable |
|---|---|
| 15 June | 15% |
| 15 September | 45% |
| 15 December | 75% |
| 15 March | 100% |
These are cumulative, not four separate payments of the stated percentage.
On an ₹80,000 liability, the amounts actually leaving your bank account are:
| Due date | Cumulative required | Paid this instalment |
|---|---|---|
| 15 June | ₹12,000 | ₹12,000 |
| 15 September | ₹36,000 | ₹24,000 |
| 15 December | ₹60,000 | ₹24,000 |
| 15 March | ₹80,000 | ₹20,000 |
| Total | ₹80,000 |
Each instalment is the cumulative target less what you have already paid. The September payment is ₹24,000, not ₹36,000. Getting this backwards is the most common arithmetic mistake in advance tax, and it leads people to think they have overpaid when they have not.
Two more things people get wrong: the first date is 15 June, not 15 July, and there is no fifth instalment in the following April. The year closes on 15 March.
The capital gains rule, which is the point of this article
Here is the provision that saves people the most money and appears in almost no general advance tax guide.
First, the point that gets misreported. These incomes are not exempt from advance tax. Tax on them is payable on the same schedule as everything else.
What Section 425(4) provides is relief from deferment interest where the shortfall in an instalment is attributable to income you could not reasonably have estimated earlier, provided you pay the tax on that income in the remaining instalment or instalments, or by 31 March where none remain.
The categories covered by that relief are:
- Capital gains, short-term and long-term
- Specified casual income, such as lottery and crossword winnings
- Dividend income
- First-time business or professional income, where you have just started
So the property sale in November does not retrospectively break your June and September instalments. You pay the tax on that gain in the December instalment, and the deferment interest does not arise on it. The tax itself is still due in full.
Where this goes wrong in practice. People know the gain is taxable and simply wait until March or until filing. That does trigger interest, because the relief requires payment in the next instalment, not eventually. The relief is a timing rule, not an amnesty.
For an investor with lumpy realisations, this changes how you manage the year: you are not estimating capital gains in June; you are reacting to them within one quarter.
The safe-harbour thresholds
There is also a statutory cushion on the first two instalments. Under Section 425(2), no deferment interest arises if you have paid at least 12% of the tax due on the returned income by 15 June, or at least 36% by 15 September, even though the headline requirements are 15% and 45%.
That margin exists precisely because early-year estimates are rough. It does not extend to the December and March instalments, which are strict.
How to calculate it
Start with a reasonable estimate of total income for the year. For a business or professional:
Estimated receipts less estimated allowable expenses = estimated business income
Then add everything else that is taxable: interest, rent, dividends, capital gains, salary where applicable.
Apply the rates under your chosen regime, add surcharge and cess, then subtract the credits:
Estimated total tax less TDS, TCS, and eligible credits = advance tax payable
The detail gets heavier where special-rate income, deductions, surcharge thresholds, or regime choice are involved. The structure stays the same.
You are not being asked to predict the year in June
Advance tax runs on estimates that you revise. Nobody expects a business owner to know their annual profit on 15 June.
The workable habit is a short review before each instalment. If the business ran hot between June and September, the September number moves up. If it runs cold, the remaining instalments come down. Four estimates, each better than the last, are how the system is designed to work.
Presumptive taxation: one payment, one date
If you have opted into the applicable presumptive scheme, the whole advance tax liability is due in a single instalment by 15 March.
No June, no September, no December.
This trips up professionals who move onto presumptive taxation mid-career and keep paying quarterly out of habit, and it trips up the reverse case harder: someone who leaves presumptive taxation and assumes 15 March still covers them. It does not. They are back on the four-instalment schedule from the first year they exit.
Check which basis you are on before the June instalment, not after it.
What happens if you underpay
Two separate provisions under the Income-tax Act, 2025, and they do different jobs.
Interest for default, Section 424. This corresponds to the old Section 234B. It applies where the advance tax paid is less than 90% of the assessed tax and runs at 1% per month or part of a month, subject to the computation and period prescribed under Section 424.
Interest for deferment, Section 425. This corresponds to the old Section 234C, and the 2025 Act states it differently from the Act it replaced. It is a flat percentage of the shortfall in each instalment:
| Instalment | Cumulative required | Interest on shortfall |
|---|---|---|
| 15 June | 15% | 3% |
| 15 September | 45% | 3% |
| 15 December | 75% | 3% |
| 15 March | 100% | 1% |
If you are reading an article or working from a template that says “1% per month for three months”, that is the previous Act’s formulation. For Tax Year 2026-27, use the percentages above.
Both provisions are subject to the safe-harbour thresholds and the Section 425(4) relief set out earlier. Which is why the honest answer to “what is the interest on advance tax” is not one number: it depends on which provision applies and which instalment was short.
Advance tax if you are an NRI
Almost no general advance tax article addresses this, and NRIs regularly get it wrong in both directions.
You are liable. Advance tax applies to India-sourced income the same way, on the same dates, subject to the same ₹10,000 threshold after credits.
But you often owe nothing. Most India-sourced income of an NRI already suffers TDS at source, frequently at higher rates than a resident would face. Where TDS has been correctly deducted on the full amount, there may be no balance to pay in advance.
Where it does bite, in order of how often we see it:
- Rental income where the tenant has not deducted TDS, or has deducted at the wrong rate
- Capital gains where TDS was under-deducted, which happens most often on property sales
- Interest income on NRO deposits where the bank’s deduction does not match your effective rate after treaty relief
And the trap. The senior citizen exemption is for resident senior citizens. An NRI aged 68 with rental and interest income in India does not get it and is on the full four-instalment schedule.
The practical rule: calculate advance tax on your taxable Indian income after considering applicable TDS, treaty relief and other eligible credits. Residential status can materially change that computation, so if you have recently returned to India, establish your status before the first instalment rather than after it.
Residential status and the RNOR window have enough nuance to need their own treatment. We cover both separately, and there is a residential status calculator on the site.
How to pay
Through the Income Tax Department’s e-filing portal.
Login → e-File → e-Pay Tax → New Payment → select the Tax Year → select the Advance Tax option → enter the amount → choose a payment method → complete.
Two operational points. Select Tax Year 2026-27 and the payments made under the Income-tax Act, 2025, not the old assessment-year framing. And save the challan every time. The acknowledgement is what reconciles against your Form 26AS and AIS at filing, and chasing a missing challan in July is a bad use of a morning.
A working routine for business owners and professionals
- Estimate the year’s income in the first week of June, roughly.
- Calculate the tax on it under your regime, including surcharge and cess.
- Subtract expected TDS and TCS.
- Pay 15%, or at least 12%, by 15 June.
- Review before each subsequent instalment. Twenty minutes, three times a year.
- Handle capital gains as they happen, in the next instalment, rather than saving them for March.
That last habit is the one that separates people who pay interest from people who do not.
If your income is lumpy, spans more than one country, or includes realisations you cannot forecast in June, advance tax stops being a calendar exercise and becomes a planning one.
We work with business owners, professionals, and NRIs on exactly this, fee-only, with no commission on anything we recommend. Book a call.
Written by
Kashish Manjani
Kashish blends strategic thinking with timeless financial principles — helping clients grow, protect, and align their wealth with their values. Kashish blends strategic thinking with timeless financial principles — helping clients grow, protect, and align their wealth with their values.
Featured in The Economic Times | Host of Money Talks with Kashish on YouTube.
FAQs
Frequently Asked questions
Do I pay advance tax on capital gains?
Yes. Capital gains are not exempt from advance tax. What Section 425(4) provides is relief from deferment interest where the gain could not reasonably have been estimated earlier, provided you pay the tax on it in the remaining instalments, or by 31 March where none remain.
What is the first advance tax due date?
15 June, for 15% of the estimated liability. Not 15 July. The remaining dates are 15 September for 45% cumulative, 15 December for 75%, and 15 March for 100%.
Do senior citizens have to pay advance tax?
A resident individual aged 60 or above during the year, with no income from business or profession, is exempt entirely. Both conditions must hold. An NRI senior citizen does not qualify, and neither does a retiree taking consulting assignments.
How much interest is charged if I miss advance tax?
There is no single figure. Interest for default under Section 424 runs at 1% per month or part of a month where less than 90% of assessed tax was paid. Interest for deferment under Section 425 is 3% of the shortfall on each of the first three instalments and 1% on the March instalment.
Do NRIs pay advance tax in India?
Yes, on India-sourced income where tax payable after TDS reaches ₹10,000. In practice, many NRIs owe nothing because TDS covers the liability. It usually bites on rental income with incorrect TDS and on property sales where TDS was under-deducted.
When is advance tax due under presumptive taxation?
The entire liability in one instalment by 15 March. The quarterly schedule does not apply. If you exit the presumptive scheme, you return to four instalments from that year.
Can I revise my advance tax estimate during the year?
Yes, and you should. Advance tax runs on estimates that you update before each instalment. Revising upward after a strong quarter, or downward after a weak one, is how the system is meant to operate.