The third installment of advance tax for the financial year 2025-26, assessment year 2026-27, was due on December 15, 2025. This মাঝেমধ্যে payment system, often referred to as "pay as you earn," ensures that individuals and businesses pay their taxes throughout the year as income is earned, rather than in a lump sum at the end. Failing to meet this deadline can lead to interest penalties.

Who Needs to Pay?

Advance tax applies to individuals, Hindu Undivided Families (HUFs), firms, and companies whose estimated tax liability for the financial year exceeds ₹10,000 after accounting for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). This includes:

• Salaried individuals with income beyond their salary, such as income from interest, capital gains, or rent.
• Freelancers and professionals.
• Business owners and self-employed individuals.

Resident senior citizens aged 60 years or above are exempt from paying advance tax, provided they do not have income from a business or profession. Taxpayers who declare income under the presumptive taxation scheme (Sections 44AD or 44ADA) can pay their entire advance tax liability in a single installment by March 15.

Payment Process

Taxpayers can pay advance tax either online or offline using Challan ITNS 280. However, companies and individuals subject to tax audits under Section 44AB must pay advance tax online.

• Online Payment:
  1. Visit the e-filing portal of the Income Tax Department.
  2. Log in using your PAN or Aadhaar number and password.
  3. Navigate to "e-Pay Tax" and select "New Payment".
  4. Select "Income Tax" and enter the required details, including the assessment year and the type of payment (advance tax).
  5. Enter the tax amount and select your preferred payment mode (net banking, credit/debit card, UPI, etc.).
  6. Make the payment and save the receipt as proof of payment.
• Offline Payment:
  1. Visit an authorized bank branch and request Challan 280.
  2. Fill out the challan with the required details.
  3. Submit the challan along with the payment (cash or cheque) to the bank counter.
  4. Obtain the stamped receipt from the bank as proof of payment.

Consequences of Missing the Deadline

Missing the December 15th deadline, or any advance tax deadline, does not attract a flat penalty, but it does trigger interest charges under Sections 234B and 234C of the Income Tax Act.

• Section 234C: This section applies to defaults in the payment of installments. It levies simple interest at 1% per month (or part of a month) on the shortfall for three months. For example, if you were required to pay ₹1 lakh by September 15th but paid it only on December 15th, you would be liable to pay 1% interest for three months, totaling ₹3,000.
• Section 234B: This section comes into play at the end of the financial year if the total advance tax paid by March 31st falls below 90% of the assessed tax liability. In such cases, interest is charged at 1% per month on the remaining shortfall from April 1st until the date of actual payment.

What to Do If You Missed the Deadline

If you missed the December 15th deadline, it is advisable to pay the remaining amount as soon as possible, ideally before March 15th. This will help minimize the interest charges. Taxpayers can still pay all the remaining advance tax in one go before the March 15th deadline. As long as the total advance tax paid reaches the required level by March 15th, no additional interest is charged for falling short of the year-end target.

Key Takeaways

• The advance tax system ensures that taxes are paid throughout the year, aligning with the "pay as you earn" principle.
• The third installment of advance tax was due on December 15, 2025, requiring taxpayers to have paid at least 75% of their estimated tax liability.
• Missing the deadline does not result in a fixed penalty, but it attracts interest charges under Sections 234B and 234C of the Income Tax Act.
• To minimize interest charges, taxpayers who missed the deadline should pay the outstanding amount as soon as possible.