The deadline for the third installment of advance tax for Assessment Year 2026-27 is fast approaching on December 15, 2025. It is crucial for taxpayers to reassess their income and Tax Deducted at Source (TDS) to ensure timely payments and avoid potential penalties.

Who Needs to Pay Advance Tax?

Advance tax is essentially a "pay-as-you-earn" system where income tax is paid in installments throughout the financial year, instead of a lump sum at the end. This applies to individuals whose estimated tax liability for the financial year exceeds ₹10,000 after considering TDS. This includes:

• Salaried individuals with income beyond their salary, such as income from fixed deposits, rent, capital gains, or freelance work.
• Freelancers and other self-employed professionals like doctors, lawyers, consultants, and chartered accountants.
• Businesses.
• Non-Resident Indians (NRIs) with income accruing in India exceeding ₹10,000.

However, resident senior citizens (60 years or older) without income from business or profession are exempt from paying advance tax. But senior citizens with business or professional income are liable to pay advance tax. Also, those who have opted for the presumptive taxation scheme must pay their entire advance tax liability in a single installment by March 15.

Understanding the Installment Schedule

The Income Tax Department has specified deadlines for paying advance tax in installments throughout the financial year. For the financial year 2025-26 (Assessment Year 2026-27), the due dates are:

• June 15
• September 15
• December 15
• March 15

Taxpayers should ensure that they pay at least 75% of their total tax liability by December 15, 2025.

How to Calculate Advance Tax

To calculate advance tax liability:

1. Estimate your total income for the financial year, considering all sources of income.
2. Calculate the tax liability on this estimated income.
3. Deduct any TDS already deducted from your income.
4. If the remaining tax liability exceeds ₹10,000, you are liable to pay advance tax.
5. Make sure that 75% of the total tax liability for the year is paid by December 15, 2025.

Taxpayers can claim deductions under Section 80C while estimating income for determining advance tax.

Penalties for Non-Compliance

Failure to pay advance tax or delaying the payment can lead to penal interest under Sections 234B and 234C of the Income Tax Act, 1961. A penal interest of 1% per month or part thereof is levied under each section.

• Section 234B is applicable for delays in advance tax payment or a shortfall in tax payment.
• Section 234C applies to non-payment or short payment of individual advance tax installments. If you pay less than 90% of your total tax liability by the end of the financial year, you will have to pay 1% interest per month under Sections 234C and 234B.

How to Pay Advance Tax

Taxpayers can pay advance tax either online or offline.

Key Dates to Remember

• December 10, 2025: ITR filing deadline for tax audit cases.
• December 15, 2025: Third installment of advance tax for FY 2025-26.
• December 31, 2025: Deadline for filing belated or revised ITR for FY 2024-25.

Missing the ITR filing deadline can result in a penalty of ₹5,000 for those with an annual income above ₹5 lakh and ₹1,000 for those with an annual income below ₹5 lakh. However, there is no penalty for filing a revised return before December 31, 2025.

By understanding the rules and regulations surrounding advance tax, taxpayers can ensure timely compliance, avoid interest and penalties, and contribute to the steady flow of government revenue.