Most taxpayers believe that income tax is paid only when filing the Income Tax Return (ITR). However, the Income Tax Act follows a different principle.
Under the Indian tax system, taxpayers are expected to pay tax during the year in which the income is earned. This concept is known as Advance Tax.
Failure to pay advance tax on time may result in interest liability under Sections 234B and 234C, while delay in filing the return may attract interest under Section 234A.
Many taxpayers face interest liability simply because they are not aware of advance tax rules, due dates, or calculation methods.
Understanding advance tax provisions can help taxpayers avoid penalties, manage tax payments efficiently, and ensure smooth tax compliance.
Advance Tax in India – Due Dates, Rules, Interest & Complete Guide (2026)
Advance tax is an important component of India’s “Pay as You Earn” taxation system. Instead of paying the entire tax amount at the time of filing the Income Tax Return, taxpayers are required to pay their tax liability in instalments during the financial year itself.
Any taxpayer whose estimated tax liability is ₹10,000 or more in a financial year, after considering TDS, is required to comply with advance tax provisions.
The provisions relating to advance tax are contained in Sections 207 to 219 of the Income Tax Act.
Advance tax is applicable not only to business owners and professionals, but also to individuals earning income from capital gains, dividends, interest, or rental income.
In this guide, we will explain:
- What advance tax means
- Who is required to pay it
- Advance tax due dates
- How to calculate advance tax
- Interest under Sections 234A, 234B, and 234C
- Practical tips to avoid interest and penalties.
Interest for Late Filing of Income Tax Return – Section 234A
If a taxpayer fails to file the Income Tax Return (ITR) within the prescribed due date—generally 31st July for individuals filing ITR 1and ITR 2, ‘ 31 st August for taxpayers engaged in non-audit business cases or trusts, and 31st October for taxpayers requiring audit—interest is levied under Section 234A of the Income Tax Act.
This interest is charged at the rate of 1% per month or part of a month on the unpaid tax amount, calculated from the due date of filing the return until the actual date of filing the return.
Thus, if the return is filed after the due date and tax remains unpaid, the taxpayer must pay interest under Section 234A for the period of delay.
| SECTION AS PER INCOME TAX ACT 2025 applicable from April 2026 onwards | CORRESPONDING PROVISIONS OF THE INCOME TAX ACT 1961 | |||||
| SECTION | HEADING | SECTION | HEADING | |||
| 403 | Liability of payment of advance tax | 207 | Liability of payment of advance tax | |||
| 404 | Conditions of liability to pay advance tax | 208 | Conditions of liability to pay advance tax | |||
| 405 | Computation of advance tax | 209 | Computation of advance tax | |||
| 406 | Payment of advance tax by assessee on his own accord | 210 | Payment of advance tax by the assesse of his own accord or in pursuance of order of Assessing Officer | |||
| 407 | Payment of advance tax by assessee in pursuance of order of Assessing Officer | 210 | Payment of advance tax by the assesse of his own accord or in pursuance of order of Assessing Officer | |||
| 408 | Instalment of advance tax and due dates | 211 | Instalment of advance tax and due dates | |||
| 409 | When assessee is deemed to be in default | 218 | When assessee is deemed to be in default | |||
| 410 | Credit for advance tax | 219 | Credit for advance tax | |||
| 423 | Interest for default in furnishing return of income | 234A | Interest for default in furnishing return of income | |||
| 424 | Interest for defaults in payment of advance tax | 234B | Interest for defaults in payment of advance tax | |||
| 425 | Interest for deferment of advance tax | 234C | Interest for deferment of advance tax | |||
| 411 | When tax payable and when assesee deemed in default | 220 | When tax payable and when assesee deemed in default | |||
Advance tax Instalments
The due date for payment of instalments of advance tax is mentioned below; if not paid on time, interest @ 1% per month will be applicable as per Section 234C( interest on instalment delayed)
| Period | Pay(%) | Interest applicable Even if delay is of one day | No interest to be paid, if paid on due date |
| By15 th June | 15% of taxable amount | 3 months | If paid on or before the due date & even if 12% of the taxable amount is paid, no interest will be charged u/section 234C |
| By15 th Sept | 45% of taxable amount | 3 months | If paid on or before the due date & even if 36% of a taxable amount is paid, no interest will be charged u/section 234C |
| By 15 th Dec | 75% of taxable amount | 3 months | No rebate |
| By 15 th March | 100% of taxable amount | 1 month | If 90% of the taxable amount is paid till 31st March, no interest will be charged u/section 234B |
Senior citizen(above 60 years during the financial year) not having any income from business and profession is exempted from paying advance tax.
If 90% of the taxable amount is paid by 31 March, no interest will be charged under section 234B.
The taxpayer who has opted for presumptive taxation 44AD and 44 ADA can pay 100% of the advance tax amount by 15th March of the financial year, with no need to pay in between. ( only one instalment), But if paid on 16 the March, then interest@1% per month has to be paid u/s 234C on the due amount.
If advance tax is not deposited on the due date, then interest is charged under Section 234C and will be regarded as an assessee in default.
The assessing officer may, under section 210(3), serve an order latest by February end of the financial year if he feels so, based on regular assessment ( based on last year’s income tax return of the assessee), that the assessee had failed to deposit advance tax ., Assessee may file his justification of not depositing advance tax electronically in Form No 28A, provide one’s estimate,
If feels that he is supposed to deposit higher amount of advance tax as compared to demanded by assessing officer he, should deposit the higher amount no need for depositing justification in Form No 28A.
If one defaults in payment of advance tax ( i.e. either pays less advance tax or pays after 31st March of the financial year then interest @ 1% per month will be applicable on the taxable amount due; one day delay will result in payment of interest of whole one month, under section 234B of Income Tax.
In case one pays 90% of the taxable amount as advance tax as of 31st March of the financial year, then no interest will be payable under Section 234B of income tax on 10% of the pending taxable amount; interest has to be paid under Section 234A of Income tax @ 1% if the pending amount is not paid till filing the return of income.
TDS deducted during the financial year will be reduced from taxable amount due to be payable as advance tax
lets understand with the help of example:-
If A has an income of Rs 13,50,000/- during the financial year FY 2024-25, the TDS deducted is Rs 1,00,000/-; the return was filed on 05/08/2025,and the remaining tax was deposited on 5/08/2025.
Advance tax paid by A are as under :-
| Month | Amount ( Rs) |
| On 20 th June,2024 | 20,000 |
| On 10 th Sep, 2024 | 10,000 |
| On 30 th Dec, 2024 | 30,000 |
| On 15 th March,2025 | 15,000 |
Taxable Income of A under old regime will come as under:-
| Income slab ( Rs) | Tax Amount ( Rs) |
| up to 2,50,000 | NIL |
| 2,50,00 to 5,00,000 | 12,500 |
| 5,00,000 to 10,00,000 | 1,00,000 |
| Above 10,00,000 | 1,05,000 |
| Cess @ 4% | 8,700 |
Income tax slab rates in India Income Tax Slabs 2026: Old vs New Regime – Smart Tax Tips
Total taxable amount for FY 2024-25 comes to Rs2,26,200/-, have to deduct TDS amount of Rs1,00,000/-
Net taxable amount on which advance tax was supposed to be deducted will be Rs 1,26,200.
| Month | Advance tax to be paid (Rs) | Advance Tax paid ( Rs) | Interest ( Rs) |
| 15 th June 2024 | (15%*126200) 18,930, rounded off to 18,900 as per Income Tax Rule 119A (18900-0)= on 18900@1%*3month | NIL | 567 |
| 15 th Sep 2024 | (45%*126200)56790, rounded off to 56,700 as per Income Tax Rule 119A(56700-20000-10000)= on 26700 @1%*3months | 30,000 | 801 |
| 15 th Dec 2024 | (75%*126200)94,650, rounded off to 94,600 as per Income Tax Rule 119A (94600-30000)=64600@1%*3month | 30,000 | 1938 |
| 15 th March 2025 | (100%*126200)1,26,200,rounded off to 1,26,200 as per Income Tax Rule 119A ( 126200-20000-10000-30000-15000)=51200@1%*1month | 75,000 | 512 |
Total interest under Section 234 C will be Rs3,818/- ( interest charged for non-payment or less payment for15June,15 Sept and ,15 Dec will be @1% and charged for three months every quarter, and for 15 March it will be @1% for one month.
The tax amount unpaid as on 31st March 2025 is Rs51200/-, and this amount was deposited on 5/08/2025, interest @ 1% per month will be charged on Rs51200/- under section 234 B for five months amounting to Rs2560/-
If, as on 31st March 2025, 90% or more amount was paid, i.e. if Rs1,13,580/- or more was paid ,than no interest would have been charged on the balance amount under section 234B.
As the Income tax return was filed on 5/08/2025 and the prescribed due date of return is 31/07/2025, interest under section 234A will be charged for one month @ 1% per month; the interest amount will be Rs512/- ( pending amount as of 31/03/2025 is Rs51220 /- and the due date for the return is 31st July 2025 but which was filed on 5/08/2025 delay of 5 days@1% per month or part of month).
Interest is levied under three sections are as under:-
- Section 234A,delay in filing return of Income.
- Section 234B,non-payment or short payment of advance tax.
- Section234C, delay on advance tax instalments.
Special Provision for Interest under Section 234C
Under Section 234C of the Income Tax Act, interest is normally charged if a taxpayer fails to pay the required advance tax instalments on the prescribed due dates.
However, the law recognizes that certain types of income cannot always be estimated in advance. Therefore, the Act provides relief from interest under Section 234C in specific situations.
Interest under Section 234C will not be levied if the shortfall in advance tax arises due to the following incomes:
- Capital gains (such as profit on sale of shares, mutual funds, or property)
- Winning from lottery, crossword puzzles, betting, or gambling
- Dividend income
- Income under the head “Profits and Gains of Business or Profession” that arises for the first time during the year
In such cases, the taxpayer is required to pay the tax on this additional income in the remaining advance tax instalments.
Capital Gains Tax Rules in India 2026 Guide: Capital Gains Tax on Shares, Funds & Property
Important Practical Rule
If such income arises after the last advance tax instalment date (15 March), the taxpayer should pay the tax before 31 March of the same financial year.
If the tax is paid within this time, interest under Section 234C will generally not apply.
However, in practice, the Income Tax portal sometimes automatically calculates interest under Section 234C. Therefore, taxpayers should carefully review the computation and may choose to pay the amount to avoid notices or disputes.
Example to Understand the Rule
Suppose Mr. A has an estimated tax liability of ₹89,960 and has already paid advance tax as per the required instalments up to 15 December 2024.
Later, on 13 March 2025, he earns additional income in the form of:
- Capital gains from sale of shares, or
- Lottery winnings, or
- Dividend income.
This new income increases his tax liability.
In such a situation:
- Mr. A will not be liable for interest under Section 234C for the earlier instalments due on 15 June 2024, 15 September 2024, and 15 December 2024, because the income arose later and could not have been estimated earlier.
However:
- The additional tax liability must be paid in the next advance tax instalment due on 15 March 2025.
If the income is received after 15 March 2025, the taxpayer should pay the tax before 31 March 2025.
Important Clarification
For example:
If Mr. A’s tax liability increases by ₹50,000 on 12 March 2025 due to capital gains or other such income, he must pay this additional tax on or before 15 March 2025.
If he fails to pay it by 15 March, then interest under Section 234C may become applicable.
Practical Tip for Taxpayers
Whenever such unexpected income arises:
✔ Recalculate total tax liability immediately
✔ Pay the additional advance tax in the next instalment
✔ If income arises after 15 March, pay tax before 31 March to avoid possible interest and compliance issues.
Advance Tax Compliance Checklist
1.Estimate Your Income at the Beginning of the Financial Year
At the start of the financial year, prepare a rough estimate of total income including salary, business income, interest, rental income, and expected capital gains. This helps in planning advance tax payments more accurately.
2. Track Income from All Sources
Many taxpayers underestimate their tax liability because they forget to include income such as:
- Interest from fixed deposits
- Dividend income
- Rental income
- Capital gains from shares or mutual funds
Including all sources ensures correct tax estimation.
3. Monitor Capital Gains During the Year
If you sell shares, mutual funds, or property, the resulting capital gain may increase your tax liability. Tax on such gains should be paid in the next advance tax instalment.
4. Review Tax Liability Before Every Instalment
Before each advance tax due date—15 June, 15 September, 15 December, and 15 March—recalculate your estimated income and tax liability. This helps avoid short payment of advance tax.
5. Use AIS and Form 26AS to Verify Income
The Annual Information Statement (AIS) and Form 26AS provide details of income reported to the tax department. Reviewing these documents helps ensure that no income is missed while calculating advance tax.
AIS and tax compliance GST & AIS Data Matching: Transforming Indian Business Compliance in 2026
6. Adjust Tax Payments if Income Changes
Income may increase during the year due to:
- Business growth
- Investment gains
- Additional consulting or freelance work
In such cases, adjust the remaining advance tax instalments accordingly.
7. Keep a Buffer for Unexpected Income
Certain incomes such as capital gains, bonuses, or lottery winnings may arise unexpectedly. Keeping a small buffer while paying advance tax can help manage such situations.
8. Avoid Paying Entire Tax in the Last Instalment
Some taxpayers delay tax payment and attempt to pay the entire amount by 15 March. This may still result in interest under Section 234C for earlier instalments.
It is better to follow the instalment schedule properly.
9. Pay Additional Tax Before 31 March if Income Arises Late
If additional income arises after 15 March, the taxpayer should pay the tax before 31 March. This may help reduce interest liability.
10. Maintain Proper Records of Tax Payments
Always keep records of:
- Advance tax challans
- Tax payment receipts
- Income calculations
These documents are useful while filing the Income Tax Return and responding to any tax notices.
Final Takeaway
Advance tax is an important part of India’s tax compliance framework. By estimating income correctly and paying tax in instalments on time, taxpayers can:
✔ Avoid interest under Sections 234B and 234C
✔ Manage tax liability smoothly throughout the year
✔ Prevent last-minute financial burden while filing the return.
Proper advance tax planning ensures better financial discipline and smooth tax compliance.
Common Mistakes Taxpayers Make While Paying Advance Tax
Even experienced taxpayers sometimes make errors while calculating or paying advance tax. These mistakes can result in interest liability under Sections 234B and 234C. Understanding these common errors can help taxpayers avoid unnecessary penalties.
1. Ignoring Other Income Apart from Salary
Many salaried individuals assume that TDS deducted by the employer covers their entire tax liability.
However, additional income such as:
- Bank interest
- Rental income
- Capital gains
- Dividend income
may increase the total tax liability. If this additional income is not considered while calculating advance tax, the taxpayer may face interest under Section 234B or 234C.
2. Not Revising Tax Estimates During the Year
Advance tax is based on estimated income. As income changes during the year, taxpayers should revise their tax estimates and adjust the remaining instalments accordingly.
Failure to update tax calculations may lead to short payment of advance tax.
3. Forgetting Capital Gains During the Year
Many taxpayers earn capital gains from:
- Sale of shares
- Mutual funds
- Property transactions
If such gains occur during the year, the taxpayer must pay additional advance tax in the next instalment.
If the tax is not paid in time, interest under Section 234C may apply.
4. Assuming Advance Tax is Required Only for Business Income
A common misconception is that advance tax applies only to business owners or professionals.
In reality, advance tax can apply to any taxpayer, including salaried individuals, if the total tax liability (after considering TDS) is ₹10,000 or more in a financial year.
5. Not Checking AIS and Form 26AS
Sometimes taxpayers forget to check:
- Annual Information Statement (AIS)
- Form 26AS
These reports may show income such as:
- Interest income
- Dividend income
- Securities transactions
Ignoring this information may lead to underestimation of tax liability.
6. Waiting Until the Last Instalment to Pay Tax
Some taxpayers delay payment and attempt to pay the entire tax amount in the last instalment of 15 March.
While this may reduce some interest, it may still trigger interest under Section 234C for earlier instalments.
Advance tax should ideally be paid proportionately as per due dates.
Practical Tips to Avoid Interest Under 234B and 234C
Taxpayers can avoid unnecessary interest by following a few simple practices:
✔ Estimate total income at the beginning of the financial year
✔ Review income and tax liability before each instalment date
✔ Track TDS and other income through AIS and Form 26AS
✔ Pay additional tax immediately if unexpected income arises
✔ Avoid waiting until the last instalment to pay the entire tax.
Proper planning ensures smooth tax compliance and prevents avoidable interest liabilities.
How Advance Tax, TDS, and Self-Assessment Tax Work Together
The Indian tax system collects tax through three primary mechanisms:
1. Tax Deducted at Source (TDS)
Under this system, tax is deducted by the payer of income before making the payment.
Examples include:
- TDS on salary
- TDS on interest
- TDS on professional payments
This ensures that a portion of tax is collected at the time income is generated.
2. Advance Tax
If the total tax payable after considering TDS is ₹10,000 or more in a financial year, the taxpayer must pay the remaining tax in advance through quarterly installments.
Advance tax is commonly applicable to:
- Business owners
- Professionals and freelancers
- Investors earning capital gains
- Individuals with rental or interest income
3. Self-Assessment Tax
Self-assessment tax is the remaining tax liability paid by the taxpayer before filing the Income Tax Return.
If after considering:
- TDS
- Advance tax
some tax is still payable, it must be paid as self-assessment tax under Section 140A before filing the return.
Interest Provisions for Delay in Tax Payment
To ensure timely tax compliance, the Income Tax Act imposes interest in the following situations:
- Section 234A – Interest for late filing of return
- Section 234B – Interest for non-payment of advance tax
- Section 234C – Interest for delay in advance tax installments
These provisions encourage taxpayers to pay tax on time and avoid unnecessary penalties and interest liabilities.
Difference Between Advance Tax, Self-Assessment Tax, and Regular Tax
The Income Tax system collects tax at different stages during the year. The three commonly used terms are Advance Tax, Self-Assessment Tax, and Regular Tax. Although they all represent payment of income tax, their timing and purpose are different.
1. Advance Tax
Advance tax is the tax that must be paid during the financial year in which the income is earned.
It applies when a taxpayer’s estimated tax liability is ₹10,000 or more after considering TDS.
Advance tax is paid in four instalments during the financial year:
- 15 June
- 15 September
- 15 December
- 15 March
The objective of advance tax is to ensure a continuous flow of revenue to the government and reduce the burden of paying tax at one time.
2. Self-Assessment Tax
Self-assessment tax is the remaining tax liability paid by the taxpayer before filing the Income Tax Return (ITR).
After considering:
- TDS (Tax Deducted at Source)
- Advance Tax already paid
if some tax is still payable, the taxpayer must pay it as Self-Assessment Tax under Section 140A.
This tax must be paid before filing the return, otherwise the return may not be considered valid.
3. Regular Tax (Tax Paid After Assessment)
Regular tax refers to the tax that becomes payable after the Income Tax Department completes assessment of the return.
If during assessment the department finds that additional tax is payable, the taxpayer must pay it as regular tax along with applicable interest.
This usually arises in cases such as:
- Scrutiny assessment
- Reassessment
- Adjustment by the Income Tax Department.
Quick Comparison Table
| Particular | Advance Tax | Self-Assessment Tax | Regular Tax |
|---|---|---|---|
| When Paid | During the financial year | Before filing ITR | After assessment by department |
| Purpose | Pay tax as income is earned | Clear remaining tax liability | Pay additional tax determined by department |
| Applicable Section | Sections 207–219 | Section 140A | Assessment provisions of Income Tax Act |
| Who Pays | Any taxpayer with tax liability is ₹10,000 or more | Taxpayer while filing return | Taxpayer after department’s order |
Payment of Advance Tax by Assessee in Pursuance of Order of the Assessing Officer
Under the Income Tax Act, the Assessing Officer (AO) has the authority to require an assessee to pay advance tax if it appears that the taxpayer has not paid advance tax or has paid insufficient advance tax.
This provision is contained in Section 210 of the Income Tax Act.
If the Assessing Officer believes that the taxpayer’s income is likely to result in a tax liability requiring advance tax payment, the officer may issue an order requiring the assessee to pay advance tax.
The order generally specifies:
- The amount of advance tax payable, and
- The instalments in which the tax should be paid.
Such an order is usually based on:
- Income declared in the previous return, or
- Information available with the tax department regarding the assessee’s income.
Income tax notices and compliance Income-Tax Notice Received in 2026? Complete Guide for Notices u/s 139(9), 143(1), 148
Option Available to the Assessee
If the assessee believes that the estimated income used by the Assessing Officer is higher than the actual expected income, the assessee is allowed to:
- Estimate his own income, and
- Pay advance tax based on his own estimate.
However, if the taxpayer underestimates income and pays insufficient advance tax, interest may still be charged under Sections 234B and 234C.
Practical Significance
In practice, such orders are rare today, because the Income Tax Department largely relies on self-assessment and voluntary compliance.
However, the provision remains important in cases where the department has information indicating substantial income that has not been considered for advance tax purposes.
Key Takeaway:-
Even when an order is issued by the Assessing Officer under Section 210, the taxpayer must carefully estimate income and ensure that the required advance tax instalments are paid on time to avoid interest liability.
Can the Assessing Officer Compel an Assessee to Pay Advance Tax?
Yes. Under Section 210 of the Income Tax Act, the Assessing Officer (AO) has the authority to issue an order requiring an assessee to pay advance tax.
If the Assessing Officer has reason to believe that a taxpayer’s income during the financial year will result in advance tax liability, the officer may serve a notice directing the assessee to pay advance tax in specified instalments.
Such an order is generally based on:
- Income declared in the previous year’s return, or
- Information available with the Income Tax Department indicating that the taxpayer may have taxable income during the year.
Right of the Assessee to Estimate Income
Even after receiving such an order, the assessee is not bound to follow the exact estimate made by the Assessing Officer.
The taxpayer is permitted to:
- Estimate his own current income, and
- Pay advance tax based on that estimate.
However, if the assessee underestimates income and pays insufficient advance tax, interest may be levied under Sections 234B and 234C.
Practical Relevance of Section 210
In modern tax administration, such orders are rarely issued, because the system now relies largely on self-assessment and voluntary tax compliance.
However, the provision remains relevant in cases where the department has information indicating substantial income that may not have been considered by the taxpayer for advance tax purposes.
Key Takeaway
While the Income Tax Act allows the Assessing Officer to require payment of advance tax, the responsibility ultimately lies with the taxpayer to correctly estimate income and pay advance tax on time.
Failure to do so may result in interest liability under Sections 234B and 234C.
When is an Assessee Deemed to be in Default? (Sections 218 and 220 of the Income Tax Act)
The Income Tax Act contains specific provisions explaining when a taxpayer may be treated as a defaulter for non-payment of tax. Two important provisions in this context are Section 218 and Section 220 of the Income Tax Act, 1961.
Section 218 – Assessee Deemed to be in Default for Advance Tax
Under Section 218, an assessee is deemed to be in default in respect of an instalment of advance tax if he fails to pay the instalment on the due date.
This provision generally applies in situations where:
- The Assessing Officer issues an order under Section 210 requiring the assessee to pay advance tax, and
- The assessee fails to pay the instalment on the due date specified under Section 211, and
- The assessee does not submit an estimate of his income or pay advance tax based on his own estimate as permitted under the law.
In such a situation, the taxpayer may be treated as an assessee in default for that instalment of advance tax.
However, the Income Tax Act provides some flexibility. If the taxpayer pays advance tax based on his own revised estimate of income, the default may not arise.
Section 220 – When Tax Becomes Payable After Notice of Demand
While Section 218 deals with advance tax instalments, Section 220 deals with the situation where tax becomes payable after an assessment order or demand notice.
When the Income Tax Department determines that tax is payable, a Notice of Demand under Section 156 is issued to the taxpayer.
According to Section 220(1):
The taxpayer must pay the amount specified in the notice within 30 days of the service of the notice of demand.
Consequence of Non-Payment under Section 220
If the taxpayer fails to pay the demanded tax within the prescribed period:
- The assessee becomes an assessee in default, and
- Interest may be charged under Section 220(2).
The rate of interest is:
1% per month or part of a month on the outstanding tax amount until it is paid.
In addition, the tax authorities may initiate recovery proceedings, such as:
- Attachment of bank accounts
- Adjustment against refunds
- Other recovery measures permitted under the Income Tax Act.
Example for Better Understanding
Suppose a taxpayer receives a notice of demand for ₹50,000 from the Income Tax Department after assessment.
If the taxpayer does not pay the amount within 30 days, he will be treated as an assessee in default under Section 220, and interest at 1% per month may be charged on the outstanding amount.
Key Takeaway
- Section 218 applies when an assessee fails to pay advance tax instalments.
- Section 220 applies when a taxpayer fails to pay tax demanded by the Income Tax Department within the specified time.
Comparison of Sections 218, 220, 234B and 234C of the Income Tax Act
| Section | Subject Matter | When It Applies | Consequence |
|---|---|---|---|
| Section 218 | Assessee deemed to be in default for advance tax | When an assessee fails to pay an instalment of advance tax as required under the advance tax provisions (generally after an order of the Assessing Officer under Section 210) | The assessee may be treated as a defaulter in respect of that instalment of advance tax |
| Section 220 | Payment of tax after notice of demand | When the Income Tax Department issues a Notice of Demand under Section 156 and the taxpayer fails to pay the tax within 30 days | The assessee becomes an assessee in default, and interest under Section 220(2) may be charged |
| Section 234B | Interest for default in payment of advance tax | When the taxpayer fails to pay at least 90% of the assessed tax as advance tax during the financial year | Interest at 1% per month on the shortfall amount |
| Section 234C | Interest for deferment of advance tax instalments | When the required advance tax instalments are not paid on the due dates | Interest at 1% per month for the shortfall in instalments |
Section 219 – Credit for Advance Tax (Income Tax Act, 1961)
Section 219 of the Income Tax Act, 1961 provides that any advance tax paid by an assessee shall be treated as payment of tax in respect of the income of the relevant assessment year.
In other words, advance tax paid during the financial year is adjusted against the final tax liability determined for the corresponding assessment year.
Important Clarification under Section 219
Advance tax paid is treated only as payment of tax. It cannot be adjusted against penalty or interest.
Therefore, while giving credit for advance tax:
✔ It is adjusted against income tax liability.
❌ It is not adjusted against penalties imposed under the Income Tax Act.
❌ It is not treated as payment towards interest liabilities.
If any penalty or interest is payable, it must be paid separately by the assessee.
Practical Illustration
Suppose the final computation of a taxpayer is as follows:
| Particulars | Amount (₹) |
|---|---|
| Total tax liability | 1,00,000 |
| Interest under Sections 234B / 234C | 8,000 |
| Penalty imposed | 5,000 |
| Total demand | 1,13,000 |
Advance tax paid during the financial year = ₹80,000
Adjustment will be as follows:
Advance tax will be adjusted only against the tax liability.
| Particulars | Amount (₹) |
|---|---|
| Tax liability | 1,00,000 |
| Less: Advance tax | 80,000 |
| Remaining tax payable | 20,000 |
Interest and penalty must be paid separately.
Total amount payable:
₹20,000 (tax) + ₹8,000 (interest) + ₹5,000 (penalty)
= ₹33,000
Key Takeaway
Section 219 ensures that advance tax paid during the financial year is credited against the tax liability of the relevant assessment year, but it cannot be treated as payment of penalty or interest.
Thus, advance tax represents payment of tax in advance, and any interest or penalty liabilities must be discharged separately.
How to pay Advance Tax online, Can it be paid thru cheque
- Go to Google
- Type income tax.gov.in
- Log in, type PAN no and Password
- Go to e file, then to e-pay tax, new payment
- Choose Income tax, advance tax
- Choose Assessment year, will show financial year also
- Choose minor head 100 for advance tax, continue
- Mention tax amount, continue
- Multi option for payment( net banking, debit card, pay at bank counter, RTGS/NEFT, Payment Gateway) .
- If want to pay thru cash or cheque then select pay at bank counter,
- In pay at bank counter, three option cash, cheque, demand draft, can pay in cash if amount up to Rs10,000. For corporates and persons for which audit is applicable E- payment is mandatory.
- Select Payment Gateway if not able to locate one’s scheduled bank; different payments options are there, do continue, will show tax challan, say pay now, continue, terms & conditions, say I agree, submit to bank, continue, multiple payment options, select and pay.
- Will redirect to the main page, will mention challan paid and can download the challan
- Advance tax paid will be reflected in AIS.
Conclusion on Advance Tax Provisions (Sections 207–219)
The provisions relating to advance tax under Sections 207 to 219 of the Income Tax Act, 1961 form an essential part of India’s “Pay as You Earn” taxation framework. These provisions require taxpayers to pay income tax in instalments during the financial year in which the income is earned, rather than paying the entire tax at the time of filing the return.
Advance tax applies to every taxpayer whose estimated tax liability exceeds ₹10,000, including individuals, businesses, professionals, and investors earning income from sources such as capital gains, dividends, or rental income.
The law provides a structured mechanism for:
- Determination of advance tax liability (Sections 207–209)
- Payment of advance tax instalments and orders by the Assessing Officer (Sections 210–211)
- Consequences of default or delay in payment (Section 218 and related interest provisions)
- Grant of credit for advance tax paid (Section 219)
These provisions ensure that the government receives regular revenue throughout the year, while taxpayers avoid the burden of paying a large amount of tax at one time.
At the same time, taxpayers must carefully estimate their income and pay advance tax on time to avoid interest liabilities under Sections 234B and 234C.
In essence, proper compliance with advance tax provisions helps maintain financial discipline, smooth tax administration, and efficient tax collection, benefiting both the taxpayer and the government.
FAQ
1. What is Advance Tax in India?
Advance tax is the income tax paid during the financial year in which the income is earned, instead of paying the entire tax at the time of filing the Income Tax Return. It is applicable when the total tax liability after TDS is ₹10,000 or more in a financial year.
2. Who is required to pay Advance Tax?
Advance tax must be paid by any taxpayer whose estimated tax liability is ₹10,000 or more during the financial year after considering TDS.
It generally applies to:
- Business owners
- Professionals and freelancers
- Individuals earning rental income
- Investors earning capital gains or dividend income
- Salaried individuals with additional income.
3. Are senior citizens required to pay Advance Tax?
A resident senior citizen (60 years or above) who does not have income from business or profession is not required to pay advance tax under the Income Tax Act.
4. What are the due dates for Advance Tax payment?
Advance tax must be paid in four instalments during the financial year:
- 15 June – 15% of total tax liability
- 15 September – 45% of total tax liability
- 15 December – 75% of total tax liability
- 15 March – 100% of total tax liability
5. What happens if Advance Tax is not paid on time?
If advance tax is not paid on time or the amount paid is insufficient, interest may be charged under:
- Section 234B – Interest for non-payment of advance tax
- Section 234C – Interest for delay in advance tax instalments.
6. Is Advance Tax applicable to salaried employees?
Yes. Salaried individuals must pay advance tax if they have additional income such as capital gains, rental income, interest income, or dividends, and the total tax liability is ₹10,000 or more after considering TDS deducted by the employer.
7. How can Advance Tax be paid?
Advance tax can be paid online through the Income Tax e-filing portal using Challan ITNS 280. Payment can be made through net banking, debit card, or UPI.
8. Is tax paid after 15 March considered Advance Tax?
Yes. Any tax paid on or before 31 March of the financial year is treated as advance tax for that financial year. However, interest under Section 234C may apply for delay in instalments.
9. What happens if unexpected income arises during the year?
If income such as capital gains, lottery winnings, or dividend income arises during the year, the taxpayer should pay the additional advance tax in the next instalment. If the income arises after 15 March, the tax should be paid before 31 March.
10. Can Advance Tax be revised during the year?
Yes. Advance tax is based on estimated income, so taxpayers can revise their estimates and adjust the remaining instalments if their income changes during the year.
Disclaimer
This publication is intended solely for informational and educational purposes and does not constitute professional, legal, tax, or financial advice. The information provided has been compiled from sources believed to be reliable; however, its accuracy, completeness, or current relevance is not guaranteed. The views and opinions expressed herein reflect the author’s understanding at the time of publication and are subject to change without notice.
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