What is advance tax?
Advance tax is the mechanism by which taxpayers with significant non-TDS income pay their tax liability in quarterly instalments during the financial year — rather than in a single lump sum at filing time. The IT Act requires this to ensure steady government revenue.
If your estimated tax liability (after TDS) exceeds ₹10,000 for the year, you must pay advance tax.
Quarterly schedule
| Due Date | Cumulative % of net tax | Shortfall months (§234C) |
|---|---|---|
| 15 June | 15% | 3 months |
| 15 September | 45% | 3 months |
| 15 December | 75% | 3 months |
| 15 March | 100% | 1 month |
Net tax = total tax liability − TDS deducted at source.
How §234C interest is calculated
For each quarter:
required_Q = net_tax × quarter_pct%
shortfall_Q = max(0, required_Q − cumulative_paid_Q)
interest_Q = shortfall_Q × 1% × interest_months
Total §234C = sum of interest across all 4 quarters
The percentages are cumulative — if you paid ₹45K by Q2, that covers Q1 + Q2 combined. A Q1 shortfall does not automatically affect Q2.
Worked example — freelancer who missed Q1
Avinash is a freelance architect. Net tax for FY 2024-25 = ₹1,00,000 (after ₹20K TDS from clients).
He missed the 15 June deadline (Q1 = ₹0 paid). He caught up from Q2:
| Quarter | Required (cumulative) | Paid (cumulative) | Shortfall | Interest |
|---|---|---|---|---|
| Q1 (15 Jun) | ₹15,000 | ₹0 | ₹15,000 | 1% × ₹15K × 3 = ₹450 |
| Q2 (15 Sep) | ₹45,000 | ₹45,000 | ₹0 | ₹0 |
| Q3 (15 Dec) | ₹75,000 | ₹75,000 | ₹0 | ₹0 |
| Q4 (15 Mar) | ₹1,00,000 | ₹1,00,000 | ₹0 | ₹0 |
| Total §234C | ₹450 |
Missing just Q1 costs ₹450 — a small but avoidable penalty.
Lump-sum Q4 scenario (common mistake)
If Avinash pays nothing until 15 March:
| Quarter | Required | Paid | Shortfall | Interest |
|---|---|---|---|---|
| Q1 (15 Jun) | ₹15,000 | ₹0 | ₹15,000 | ₹450 |
| Q2 (15 Sep) | ₹45,000 | ₹0 | ₹45,000 | ₹1,350 |
| Q3 (15 Dec) | ₹75,000 | ₹0 | ₹75,000 | ₹2,250 |
| Q4 (15 Mar) | ₹1,00,000 | ₹1,00,000 | ₹0 | ₹0 |
| Total §234C | ₹4,050 |
Paying everything in one lump sum in March still satisfies §234B (≥ 90% paid by 31 March), but the Q1–Q3 shortfalls still accumulate ₹4,050 in §234C interest.
Bridges
- Income Tax Calculator — compute total tax liability before setting up the advance-tax schedule
- TDS Calculator — §234A interest on late return filing (separate from §234C)