Here is a tax habit that surprises first-time earners. You do not pay your income tax once a year. If your tax for the year is likely to be ₹10,000 or more, you pay it in four instalments as the year goes on. That is advance tax.

The logic is simple. The government does not want to wait until March for the whole year's tax. And it does not want you to face one crushing payment either. Advance tax splits the bill across the year.

Ignore the instalments, and the bill does not disappear. It grows. Interest under Sections 234B and 234C — roughly one percent per month on the shortfall — gets added to what you owe. Pay late, pay more. That is the whole story.

The four dates to memorise

For companies, and for individuals and firms too, the instalment schedule for a financial year is:

  • 15 June — at least 15% of your estimated total tax
  • 15 September — at least 45% (cumulative)
  • 15 December — at least 75% (cumulative)
  • 15 March — 100% of the year's tax

These are cumulative figures. By December, you should have paid three-quarters of the year's tax, not three-quarters of one quarter. People get this wrong. Read the dates twice.

There is one genuine exception. Taxpayers under the presumptive schemes — Sections 44AD and 44ADA — pay the entire advance tax in one instalment by 15 March. And resident senior citizens with no income from business or profession are exempt from advance tax altogether.

How to estimate without guessing wildly

Advance tax runs on estimation, and estimation is the hard part. You are forecasting your full year's income in June. Businesses with lumpy revenue — project-based income, seasonal sales — find this genuinely difficult.

Think of it like an EMI. When you take a loan, the bank does not ask for the whole amount at the end; you pay as you go, and the schedule is fixed even though your income that month may vary. Advance tax works the same way: fixed dates, pay what you can reasonably estimate, and adjust at the next instalment if the year's income picture has changed. Overpaying is not a disaster either — excess advance tax is refunded with interest when you file your return.

The practical method I recommend: estimate your year's taxable income each quarter, subtract the TDS already deducted on it, and pay the advance tax on the balance. Your Form 26AS and Annual Information Statement will show the TDS credits; work from those numbers, not from memory.

The interest trap, explained honestly

Two sections, two different mistakes.

Section 234B applies when your total advance tax for the year falls short of 90% of your actual tax. Interest runs at 1% per month from April of the assessment year until the tax is paid. This is the "you paid far too little" section.

Section 234C applies when you miss the quarterly rhythm — you paid the right total eventually, but a particular instalment was short. Interest at 1% per month on the shortfall of that instalment. This is the "you paid late in the year" section.

Both run automatically. Your assessing officer does not need to prove intent. The calculation is mechanical: dates and amounts in, interest out.

The good news: TDS counts. Tax deducted at source on your income is credited against your advance tax liability. If your salary TDS and other deductions already cover the year's tax, you owe no advance tax. Many salaried employees with one income source never touch advance tax at all. The people who must watch it are those with significant income beyond salary — rent, professional fees, capital gains, business profits.

A worked illustration

Let me make this concrete with an illustration. Suppose your estimated total tax for the year is ₹4,00,000, and TDS of ₹40,000 has already been deducted on your income. Your advance tax base is ₹3,60,000.

By 15 June, you should have paid 15% — ₹54,000. By 15 September, 45% cumulative — ₹1,62,000 total, so a further ₹1,08,000. By 15 December, 75% — ₹2,70,000 total, so another ₹1,08,000. By 15 March, the full ₹3,60,000 — a final ₹90,000.

Now suppose your income surprises you in February and the year's actual tax works out to ₹4,60,000 instead of the estimated ₹4,00,000. You are allowed — expected, even — to revise your estimate at the March instalment and pay the difference. The interest provisions penalise persistent underpayment, not honest revision. The system assumes you will adjust as the year clarifies.

This is only an illustration, not advice for your numbers. But the mechanics are exactly this mechanical.

Paying it

Advance tax is paid online through the e-pay tax facility on the income-tax portal, using the challan for advance tax. Keep the challan counterfoil — actually, keep the digital acknowledgement. When you file your return, you will claim these payments as credit, and mismatches between your return and the tax department's records are one of the commonest sources of processing delays.

Mark the four dates on your calendar now. June, September, December, March. Four payments, each a little smaller than the alternative: a year's tax plus interest, all at once.