Advance tax deadline nears: What salaried taxpayers, freelancers, and senior citizens should know

Advance tax is also known as a 'pay as you earn tax' because it enables taxpayers to pay tax as they receive income.

Here’s everything salaried taxpayers, freelancers, and senior citizens need to know about the advance tax payment by March 15.

According to the Income-tax Act, 1961, every person with a net income tax liability exceeding ₹10,000 in any financial year is required to make advance tax payments.

The net tax liability is the tax calculated after deducting TDS within the financial year. So, if your total tax liability after considering TDS is more than ₹10,000, you are expected to pay advance tax, failing which you will end up paying penalties.

Advance tax can be paid in four quarterly installments between June 15 and March 15 of the financial year, as per Section 211 of the Income Tax Act.

Advance tax due dates

For example, for the current FY 2025-26 (AY 2026-27), a person was required to pay the first installment of advance tax by June 15, the second installment by September 15, and the third installment by December 15. The final installment needs to be paid by March 15.

Do salaried, freelancers, and senior citizens need to pay advance tax?

Not all persons with net income liability above ₹10,000 in a financial year is required to pay advance tax as per the four installments discussed above. The income tax law allows some exceptions.

Senior citizens (individuals aged 60 or more) are not required to pay advance tax if they do not have any income from business or profession.

Salaried employees are generally not required to pay advance tax on their own as employers do it on their behalf.

The TDS deducted by the employer usually covers the entire tax on salary income. Therefore, salaried persons generally do not need to pay advance tax on their own.

However, if you are a salaried person with additional income such as rent, interest, capital gains, freelance income, etc. that creates a tax liability of more than ₹10,000 after TDS, then you have to pay advance tax on that additional income.

What happens when you miss the advance tax payment

Non-payment of advance tax can lead to penal charges. These charges are levied as follows under sections 234B and 234C of the Act:

• A penal interest of 1% per month or part thereof is imposed in each section.

• Section 234B applies in case of non-payment of advance tax or when payment of advance tax is less than 90% of final tax liability.

• Section 234C applies to the nonpayment or underpayment of each advance tax installments.

How to pay advance tax

You can pay advance tax using the income tax department's e-filing portal. It can also be done offline through the offline bank challan method. You can make online tax payment using multiple methods such as as debit card, net banking, RTGS/NEFT, UPI and credit card.