Updated for FY 2026-27 (AY 2027-28). Note: Tax laws can be complex and are subject to change. This guide is for informational purposes and should not be considered as professional tax advice. Please consult with a qualified chartered accountant for your specific situation.

Advance tax without the last-minute panic: four dates, two interest sections, and a quarterly 10-minute drill

Most freelancers and small companies do not miss advance tax because they cannot afford it. They miss it because nobody computed the number until the books were closed in July, by which point sections 234B and 234C have quietly added a few thousand rupees to the bill. This piece gives you the dates, the arithmetic behind the interest, two worked examples in rupees, and a routine short enough that you will actually run it four times a year.

Who has to pay, and who gets a pass

Advance tax applies when your total tax for the year, after subtracting TDS and TCS already deducted on your income, is likely to be ₹10,000 or more. That is tax after credits, not turnover, so a freelancer billing ₹20 lakh entirely to Indian companies that deduct 10% under section 194J may owe nothing in advance, while another billing ₹20 lakh to overseas clients with zero TDS owes the whole lot.

Two groups get easier treatment. Resident senior citizens with no business or professional income are outside advance tax altogether — if that might be you, confirm with your CA. And anyone declaring income under section 44AD (businesses, 8% of turnover, 6% on digital receipts, up to ₹3 crore) or section 44ADA (professionals, 50% of receipts up to ₹75 lakh, with cash receipts at 5% or less) has a single deadline: 100% by 15 March.

Everyone else — companies, LLPs, freelancers on regular books, salaried people with large capital gains or rental income — follows four dates.

The four dates, and why they are cumulative

The word to underline is cumulative. The September instalment is not another 45%; it is whatever takes your total payments for the year to 45% of the estimated liability. If you paid nothing in June, the September cheque is 45%, not 30%.

Payment is through challan ITNS 280 on the income-tax portal, under minor head 100 – Advance tax. Use code 300 only for self-assessment tax paid after the year ends. Picking the wrong minor head is a common reason a payment does not show up correctly in your tax records like Form 26AS or the AIS.

What 234B and 234C actually cost

Both sections levy simple interest at 1% a month on the shortfall, rounded down to the nearest hundred rupees. They punish different things.

Section 234C is the instalment penalty. Miss or underpay a quarter and you pay 1% a month for three months on the gap (or one month for the 15 March instalment, since the year ends shortly after). There are small tolerances built into the first two instalments for people whose income is genuinely hard to estimate early — ask your CA whether you qualify before relying on them.

Section 234B is the year-end penalty. If your total advance tax paid plus TDS comes to less than 90% of your final assessed tax, interest runs at 1% a month from 1 April of the assessment year until you pay the balance. File in July and you have already incurred four months of it.

The two stack. A freelancer who pays nothing until the return is filed pays 234C on the missed instalments and 234B on the months after 31 March.

Worked example: a 44ADA consultant with ₹48 lakh of receipts

Priya is an independent management consultant. For FY 2026-27 she expects receipts of ₹48,00,000 — ₹18,00,000 from Indian clients who deduct TDS under 194J, and ₹30,00,000 from overseas clients who deduct nothing. Her cash receipts are nil, so 44ADA is available. She also expects ₹20,000 of savings-bank interest, and she is on the default new regime.

• Presumptive income: 50% of ₹48,00,000 = ₹24,00,000
• Add interest: ₹20,000 → total income ₹24,20,000

New-regime slabs:

TDS at 10% on ₹18,00,000 = ₹1,80,000. Advance tax payable: ₹1,38,240, and because she is on 44ADA the whole of it is due by 15 March 2027.

Now suppose she forgets and pays on 20 July 2027 when filing.

• 234C: one month at 1% on ₹1,38,200 = ₹1,382
• 234B: her advance tax plus TDS (₹1,80,000) is below 90% of ₹3,18,240, so interest runs April to July — four months at 1% on ₹1,38,200 = ₹5,528

Total interest added: ₹6,910 for a payment she was always going to make. One calendar reminder in early March would have saved it.

Worked example: a small company on four instalments

Kaveri Interiors Pvt Ltd expects a taxable profit of ₹30,00,000 for FY 2026-27. Its turnover is well under ₹400 crore, so the tax rate is 25%.

• Tax: ₹7,50,000; cess 4%: ₹30,000; total ₹7,80,000 (surcharge can apply at higher income levels — check with your CA)
• Expected TDS credit on contract and professional receipts: ₹1,00,000
• Advance tax for the year: ₹6,80,000

If the company skips June and pays ₹3,06,000 only on 15 September, 234C applies to the June shortfall of ₹1,02,000 for three months at 1% — ₹3,060. Small, but it repeats every quarter you skip.

Book each payment as an asset, not an expense. The September instalment:

At year end, the provision goes through separately, and advance tax plus TDS receivable are set off against it:

Keeping advance tax out of the P&L matters. Debit it to an expense head and your quarterly profit is understated, which then feeds a wrong estimate for the next instalment.

The 10-minute routine, four times a year

Put four reminders in your calendar for 8 June, 8 September, 8 December and 8 March — a week before each due date, so a bank failure does not become a missed deadline. When the reminder fires:

1. Close the books to date (3 minutes). Reconcile the bank up to the previous month end so revenue and expenses are complete. If reconciliation is where you usually lose an afternoon, the method in our bank statement reconciliation guide cuts it to minutes.
2. Annualise (2 minutes). Take profit for the months elapsed, project the remaining months at the same run rate, and adjust for anything you already know — a large invoice landing in February, an insurance renewal, a bonus. Presumptive filers skip this and just project receipts.
3. Compute tax and subtract credits (3 minutes). Apply the slabs or company rate, add 4% cess, then subtract TDS already deducted. Pull the TDS figure from your own ledger of deductions rather than from memory; reconcile it against Form 26AS at least once a quarter.
4. Pay the cumulative gap and record it (2 minutes). Multiply by 15/45/75/100%, subtract what you have already paid, pay the balance on challan 280 with minor head 100, and post the Dr/Cr entry above with the challan number in the narration.

Three things people get wrong in this drill: forgetting capital gains (a December share sale changes the March instalment, and 234C treats capital gains more gently only if you pay in the instalment following the gain), ignoring GST-exempt or overseas income because no TDS was cut on it, and using last year's profit as this year's estimate when the business has clearly grown.

Doing this in FlipAccounts

Run the quarterly drill from the statements pack: reconcile the bank from your PDF or CSV statement, then open the P&L for the period to date to get the profit figure you will annualise. The tax computation screen handles both the personal side (new versus old regime, slabs, rebate, ITR pack) and corporate tax, so you can test a projection before you pay. Record the challan as a payment to an "Advance tax – FY 2026-27" asset account, and the TDS summaries give you the credits to subtract at the next instalment. The core accounting is free, with no card and no limits, so the routine costs you only the ten minutes.

What to do this week

1. Create four calendar reminders — 8 June, 8 September, 8 December, 8 March — and attach your challan 280 bookmark to each.
2. Open a current-asset ledger called "Advance tax – FY 2026-27" and move any advance tax already debited to expenses into it.
3. Do one dry run now: project this year's profit, compute the tax, subtract TDS, and note the four instalment amounts on paper.

Frequently asked questions

I overestimated and paid too much advance tax. Is it stuck?

No. Excess advance tax becomes a refund when you file the return, and interest is payable to you on it in most cases. Over-paying is a cash-flow cost, not a loss — but it is still worth re-estimating in December rather than parking surplus with the department for a year.

My income is lumpy and I genuinely cannot estimate it in June. What then?

Estimate on the best information you have and revise at each instalment; the system is designed for that, which is why the percentages are cumulative. A June underestimate corrected in September costs 1% a month for three months on the gap, and there are statutory tolerances for the first two instalments — your CA can tell you if yours falls inside them.

Does TDS already deducted count towards the instalment percentages?

No. The instalment percentages (15%, 45%, etc.) apply to your total advance tax liability for the year. To calculate that liability, you first estimate your total tax on all income, and then subtract the total TDS you expect to be deducted. The percentages are applied to the net amount payable.

What is the difference between advance tax and self-assessment tax?

Advance tax is paid in instalments during the financial year based on an estimate of your income. Self-assessment tax is the final balance you pay after the financial year has ended, when you have the exact income figures and are about to file your return. If your advance tax payments (plus TDS) were less than your final liability, the difference is paid as self-assessment tax.

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