- Missing deadlines incurs 1% monthly interest on shortfall.
In most cases, taxes are deducted quietly from your salary each month. But for individuals earning extra income beyond their salaries through mutual fund redemptions, freelance work, rental income or business profits, the tax department expects you to pay your dues in instalments throughout the year. This is called advance tax.
What is Advance Tax?
Advance tax is paid in installments at fixed intervals throughout the year rather than in a single lump sum at the end of the year. Instead of sitting on the money that belongs to the government, you pay it in tranches across the financial year.
Not everyone needs to pay advance tax. It only applies if your remaining tax bill for the year, after subtracting any TDS, crosses Rs 10,000. Anything below this amount and you are exempt.
It applies to a lot more people than typically assumed. Salaried individuals, businessmen, and self-employed professionals all fall under its scope, not just companies. Only resident senior citizens who do not have business or professional income are exempt from paying advance tax.
Missing advance tax dates carries a real cost, which is where most investors get caught off guard.
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The Next Deadline: June 15, 2026
The financial year 2026-27 has four advance tax due dates. The first, and the one immediately ahead, is June 15, 2026.
By this date, taxpayers are required to pay at least 15 per cent of their total estimated advance tax liability for the year. The remaining installments require 45 per cent by September 15, 75 per cent by December 15, and the full 100 per cent by March 15.
For mutual fund investors in particular, this first installment is worth paying attention to. If you have redeemed equity or debt fund units at a profit since April 1, those gains count as income for FY 2026-27. Depending on the size of the redemption, they could push your tax liability well above Rs 10,000, making advance tax mandatory.
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What Happens If You Miss It?
Missing an advance tax deadline doesn’t mean a fixed penalty. Instead, the tax department charges interest on whatever amount you failed to pay on time. This interest is calculated automatically when you file your return, and no tax officer has the power to waive or reduce it.
Two sections of the Income Tax Act 2025 govern this:
Section 425: Deals with missing quarterly instalments. If your total advance tax for the year is Rs 1 lakh. By June 15, you were supposed to pay Rs 15,000 (15 per cent of that). If you paid nothing, the tax department charges 1 per cent interest per month on that Rs 15,000 until you pay it.
Section 424: It is a separate, broader provision. Even if you paid something throughout the year, if your total advance tax payments added up to less than 90 per cent of your final tax bill, Section 424 applies. Interest at 1 per cent per month is charged on the gap, starting April 1 of the following year, until you clear it.
In practice, both can apply simultaneously, Sec 425 if you miss the quarterly deadline and Sec 424 if your total advance tax across the year falls short of the 90 per cent threshold.
Importantly, advance tax is cumulative. If you underpay in June, you can make up the shortfall in September. The interest applies only to the period and amount of the shortfall, not your entire liability.
The simplest way to avoid penalties is to estimate your gains before June 15 and pay accordingly, even if the estimate is rough. It is important that you understand the taxes you are paying. For a detailed understanding of your taxes, you can also get in touch with a tax professional.
