When it comes to income tax, most people think that tax is paid only at the end of the year while filing the Income Tax Return (ITR). But in reality, if your income is high, you may need to pay part of your tax during the year itself. This system is called Advance tax (2025).
For businesses, professionals, and freelancers, advance tax is very important because not paying it on time can lead to interest and penalties. Let us understand in simple language what Advance tax 2025, who needs to pay it, and when it should be paid.
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What is Advance Tax ?
It means “pay as you earn.” Instead of paying the whole income tax at the end of the year, the government requires you to pay tax in installments during the financial year if your expected tax liability is more than ₹10,000.
This ensures a steady cash flow for the government and also reduces the burden for taxpayers at the end of the year.
Who Needs to Pay Advance Tax 2025?
It is required only if your total tax liability for the year, after deducting TDS, is ₹10,000 or more.
It applies to:
- Business owners and traders
- Freelancers and professionals such as doctors, lawyers, consultants, and CAs
- Companies, both private and public
- Salaried employees, if salary TDS does not cover their full tax liability, for example if they earn extra income from rent, capital gains, or interest
Who is not required to pay advance tax:
- Senior citizens (60 years and above) with no business income
- Individuals whose total tax liability is less than ₹10,000 in a year
Due Dates for Advance Tax in FY 2024–25 (AY 2025–26)
The government has fixed specific dates and percentages for advance tax payment. Businesses and professionals under normal taxation must pay in four installments:
- By 15th June – At least 15% of total tax liability
- By 15th September – At least 45% of total tax liability
- By 15th December – At least 75% of total tax liability
- By 15th March – 100% of total tax liability
Even if you miss the earlier installments, you can pay the balance advance tax by 31st March of the financial year.
Advance Tax under Presumptive Taxation (44AD/44ADA)
Small businesses with turnover up to ₹2 crore and professionals with income up to ₹75 lakh who opt for presumptive taxation are required to pay advance tax in only one installment.
They must pay the entire advance tax liability by 15th March of the financial year. For example, if your estimated tax is ₹50,000, you must pay the full amount by 15th March.
How to Calculate Advance Tax?
Calculating advance tax is the same as calculating income tax, but you do it in advance.
- Estimate your total income for the financial year.
- Calculate tax liability using the applicable tax slab rates.
- Subtract TDS already deducted by employers, banks, or clients.
- If the balance tax payable is more than ₹10,000, pay advance tax in installments.
Example:
- Estimated business income: ₹15,00,000
- Total tax liability: ₹2,00,000
- TDS deducted: ₹40,000
- Net payable: ₹1,60,000
This ₹1,60,000 must be paid as advance tax in four installments.
What Happens if You Do Not Pay Advance Tax?
If you miss or delay advance tax payments, the Income Tax Department charges interest under Section 234B and Section 234C.
- Section 234B: If you fail to pay at least 90% of total tax liability by 31st March.
- Section 234C: If you miss or delay quarterly installments.
The interest rate is generally 1% per month on the unpaid tax amount. Paying on time helps you avoid this extra cost.
How to Pay Advance Tax Online?
- Visit the Income Tax e-filing portal (https://www.incometax.gov.in/iec/foportal/).
- Select the e-Pay Tax option.
- Choose Advance Tax (Minor Head 100).
- Enter your PAN, assessment year, and tax amount.
- Pay using net banking, UPI, or debit card.
- Save the challan receipt (Challan 280) for your records.
Conclusion
Advance tax is a simple concept if you understand it well. It is basically paying your tax liability in advance to avoid last-minute burden and penalties.
If you are a business owner, professional, or freelancer with tax liability above ₹10,000, advance tax is compulsory. Under normal taxation, pay it in four installments, and under presumptive taxation, pay it in one installment by 15th March.
By planning your income and paying advance tax correctly, you can save money, stay stress-free, and remain compliant with income tax rules.
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