Navigating the complexities of income tax can be daunting, especially when it comes to understanding advance tax payments. A common question arises: Should you pay advance tax if your income is below ₹12 lakh? Here’s a breakdown of what you need to know.

Who is Required to Pay Advance Tax?

The general rule is that if your estimated tax liability for the financial year exceeds ₹10,000, you are required to pay advance tax. This applies to various categories of taxpayers, including salaried individuals, freelancers, and businesses. However, there are exceptions and nuances to this rule.

The ₹10,000 Threshold

Regardless of your income level, if after deducting Tax Deducted at Source (TDS) your total tax payable for the year is more than ₹10,000, you are liable to pay advance tax. This condition applies irrespective of the tax regime you follow.

For example, consider a situation where an individual has a bank interest income of ₹3 lakh and short-term capital gains from listed shares of ₹3 lakh for FY26. Even if their income is below ₹12 lakh, they might still be required to pay advance tax. Under the new tax regime (which is now the default), no tax would be payable on the bank interest as it is below ₹4 lakh. However, tax would be applicable on the short-term capital gains. If the tax on these gains amounts to ₹40,000 (plus a 4% education cess), and assuming a TDS of ₹30,000 on the bank interest, the net tax liability would exceed ₹10,000, making the individual liable for advance tax.

Exemptions from Advance Tax

There are specific cases where individuals are exempt from paying advance tax. Resident senior citizens (those aged 60 years and above) who do not have any income from business or profession are not required to pay advance tax. However, senior citizens with business or professional income are still required to pay advance tax if their tax liability exceeds ₹10,000.

Rebate Under Section 87A

A rebate of ₹60,000 is available to resident individuals with income up to ₹12 lakh. While tribunals have considered that this rebate applies even on short-term capital gains, there has been an amendment in Section 87A stating that the rebate amount shall not exceed the rate provided in Section 115BAC. The intention behind this amendment is to possibly deny the rebate against tax on short-term capital gains, though the language suggests the rebate might still be available to the extent of the rates prescribed under Section 115BAC.

Advance Tax Payment Due Dates

If you are liable to pay advance tax, it is crucial to adhere to the payment schedule. The due dates for advance tax payments for individuals and corporate taxpayers are as follows for FY 2025-26 (AY 2026-27):

• On or before June 15: 15% of total tax liability.
• On or before September 15: 45% of total tax liability (minus advance tax already paid).
• On or before December 15: 75% of total tax liability (minus advance tax already paid).
• On or before March 15: 100% of total tax liability (minus advance tax already paid).

Taxpayers who have opted for the presumptive taxation scheme under Sections 44AD and 44ADA must pay their entire advance tax liability in a single installment on or before March 15.

Non-Resident Indians (NRIs)

Even non-resident Indians (NRIs) are liable for advance tax payment if their income accruing in India exceeds ₹10,000.

Consequences of Not Paying Advance Tax

Failure to pay advance tax or not paying the required amount by the due dates can result in interest charges under Section 234B of the Income Tax Act. A taxpayer is required to pay at least 90% of their total taxes through advance tax or TDS by March 31. Failing this, they will incur interest charges at a rate of 1% on the unpaid amount.

In conclusion, while your income being below ₹12 lakh might make you think you are exempt from advance tax, it is essential to assess your total tax liability after considering all income sources, deductions, and TDS. If your tax liability exceeds ₹10,000, you are obligated to pay advance tax, irrespective of your income level. Staying informed and planning your tax payments can help you avoid penalties and ensure compliance with income tax regulations.