“There is no direct penalty,” a CA explains, but skipping today’s advance tax payment will still cost you. The third and most important instalment for the 2025–26 financial year was due on Monday, December 15. Taxpayers with substantial income beyond salary who miss this date face automatic interest charges, increasing their final tax bill. Knowing the rules can help limit the impact and plan ahead before the March deadline.
Who Needs to Pay Advance Tax by December 15?
Advance tax applies if your estimated tax liability for the year is more than ₹10,000. This often affects people earning from freelancing, business, rent, capital gains, or interest. Even salaried employees must pay advance tax if their TDS is lower than their total yearly tax. The tax is paid in four instalments, with December 15 being the third deadline, when 75% of the total estimated tax should be paid.
What is the Immediate Cost of Missing the Deadline?
Although no outright penalty applies, Section 234C of the Income Tax Act imposes interest for underpayment. If 75% of your estimated tax was not paid by December 15, you are charged simple interest at 1% per month on the remaining amount. The interest is calculated for three months. For instance, a ₹10,000 shortfall results in ₹300 as interest, which is added to your final tax bill at the time of filing.
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Can You Still Catch Up Before the Final Deadline?
Yes, there is still a way to fix this. If you missed the December instalment, you can pay the entire remaining amount in one go by the final advance tax deadline of March 15. In this case, you only pay interest for the delayed December payment. As long as you clear 100% of your estimated tax by March 15, no extra interest under Section 234B will apply. This makes the March deadline crucial for correcting the shortfall.
Who is Automatically Exempt from These Payments?
A key exemption exists for senior citizens aged 60 and above. If they have no income from a business or profession, they are not required to pay advance tax at all. This exemption holds even if they earn other income like pension, interest, or capital gains. For all other taxpayers, planning for these quarterly deadlines is essential to avoid year-end surprises and unnecessary interest payments.
Important Advance Tax FAQs:
Q: What are the four advance tax due dates and percentages?
A: 15 June (15%), 15 September (45%), 15 December (75%), and 15 March (100%) of your estimated annual tax.
Q: Is the interest a one-time fee or a monthly charge?
A: It is a monthly charge. Interest at 1% per month is applied on the shortfall for the delay period.
Q: What is Section 234B interest?
A: This is a separate annual interest. If you pay less than 90% of your total tax liability by March 31, interest at 1% per month applies on the entire shortfall from April 1 until the date of payment.
Q: How do I estimate my advance tax liability?
A: Determine your entire anticipated revenue for the fiscal year from all sources, calculate the tax, deduct any TDS that has already been withheld, and pay the remaining amount in installments.
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