December 15 deadline: Pay 75% advance tax to avoid Section 234C penalty

Advance tax is the payment of tax during the financial year in 4 instalments rather than all at once, based on the estimated income for the year. For FY 2025–2026, the third instalment of advance tax must be paid by December 15, 2025, in the third quarter.

What is advance tax?

The scheme of advance tax requires every assessee to estimate their current income, and if the tax liability on such estimated income exceeds the specified limit, the assessee is required to pay the estimated tax in instalments during the financial year itself.

Who is liable to pay advance tax?

• Every person whose estimated tax liability for the Financial Year is ₹10,000 or more shall pay their taxes in advance in the form of "advance tax".

• However, a resident senior citizen (i.e., an individual of the age of 60 years or above) not having any income from a business or profession is not liable to pay advance tax.

Consequences of missing the December 15 deadline

“Delaying or underpaying advance tax attracts interest at 1% per month, or 12% annually, and even a single day’s delay triggers a minimum three-month interest charge,” said Mumbai-based tax and investment expert Balwant Jain. “For example, if your advance tax liability is ₹1 lakh and you miss the ₹30,000 instalment due on December 15, you would still owe ₹900 in interest even if you paid it the very next day,” added Jain.

Deadlines for advance tax payments

• June 15: 15% of the advance tax must be paid.

• September 15: Deduct any already paid taxes and pay 45% ( cumulative) of the advance tax.

• December 15: After deducting any taxes that have already been paid, pay 75% (cumulative) of the advance tax.

• March 15: Deduct any already paid taxes and pay the remaining advance tax balance.

What are the consequences of failure to deposit advance tax?

If the assessee does not pay the advance tax in accordance with the specified due dates, he shall be liable to pay the following interest:

(a) Interest under section 234B for default in payment of advance tax

(b) Interest under section 234C for deferment of payment of advance tax.

Interest on advance tax under Section 234B

According to Section 234B, taxpayers are required to pay at least 90% of their total tax liability through advance tax or TDS/TCS by March 31. If this payment is not made, interest is charged at 1% per month on the outstanding amount.

Interest on advance tax instalments under Section 234C

When advance tax instalments are not paid by their respective due dates, interest at a rate of 1% per month is levied on the delayed amount.