Individuals whose estimated tax liability is likely to be over Rs 10,000 in a financial year are required to pay advance tax that year.

Why you must pay your third advance tax installment by December 15

Many salaried individuals often make the mistake of assuming that advance tax payments are only for business persons or corporates.

However, the fact is that any individual whose estimated tax liability is likely to be over Rs 10,000 [after considering tax deducted and collected at source (TDS and TCS)] in a financial year is required to pay advance tax that year, as per Section 208 of the Income-Tax (I-T) Act, 1961. Resident senior citizens who do not draw any income from business or profession are exempted.

Advance tax is to be paid before the end of the financial year on the income that you would have earned in the same year. The due date for paying the third installment of advance tax for financial year 2024-25 is December 15.

This time round, the due date falls on a Sunday. While technically, you can make the payment on Monday, it is best to complete the process as soon as you can.

As per I-T rules, you have to clear your advance tax dues in four installments – June 15, September 15, December 15 and March 15 during the financial year itself.

In the case of salaried individuals, their employers deduct tax before depositing their salaries at the end of the month. However, they do not take into account several other sources of income, such as interest from deposits, capital gains booked on the sale of shares and mutual fund units, etc. On your part, when you compute your advance tax liability, you need to factor in these incomes as well.

Taxpayers are required to pay 15 percent of their estimated advance tax liability by June 15. By September 15, you should have paid 45 percent of the total amount due, 75 percent by December 15 and 100 percent by March 15.

However, if you are a self-employed businessperson or professional who has opted for the presumptive taxation scheme, the rules are different. Such individuals, too, have to pay advance tax, but they are allowed to make payment at one go — in the last quarter of the financial year, by March 15. This flexibility is provided after accounting for the challenges that small businesses may face while estimating their advance tax liability at the beginning of the financial year.

Payments through the I-T portal

To pay your dues, you need to log on to www.incometax.gov.in. If you haven’t done so already, you need to first register yourself using your PAN. Next, click on ‘e-pay tax’ under the ‘Quick Links’ menu on the left-hand side of the website. Follow the instructions to confirm your PAN, enter the OTP and proceed to select the right assessment year (2025-26) when you are paying advance tax for financial year (2024-25) and ‘Advance Tax (100) as the ‘type of payment’.  Click on ‘Continue’, enter the details and proceed to make the payment to complete the process.

Skipped advance tax payments? Know the consequences

Paying advance tax is mandatory for those with estimated tax liability of over Rs 10,000 during the financial year.

If you fail to adhere to the rules and due dates, you might have to shell out penalties. You will have to pay simple interest at the rate of 1 percent per month on the amount of less-than-required payment or non-payment of advance tax by the due date, for the period till the amount is paid.

The penal interest on the deficit amount applies only if the total advance tax paid is less than 12 percent and 36 percent of the advance tax due by June 15 and September 15, respectively. Similarly, penalty will come into play if the advance tax you have paid is less than 75 percent and 100 percent of the due amount by December 15 and March 15, respectively.

Installments for the financial year	Due date	Advance tax payable
First installment	June 15	15% of the total tax liability
Second installment	September 15	45% of the tax liability as reduced by the amount, if any, paid in the earlier installment
Third installment	December 15	75% of the tax liability as reduced by the amount, if any, paid in the earlier installment
Fourth installment	March 15	100% of the tax liability as reduced by the amount, if any, paid in the earlier installment

If you miss the last installment – March 15 – too, you can still clear the dues by March 31, but you will have to cough up one month of interest, as per Section 234C of the I-T Act.

However, if you decide to clear your tax liability at the time of filing tax returns before July 31 (due date for filing ITR for the previous financial year), the tax department will treat it as a default in advance tax payment. In such cases, you will have to pay an additional four months’ penal interest (1 percent per month) under Section 234B.

Source : Money control