Advance tax for salaried employees FY 2025-26: who needs to pay, when, and how to calculate it

If your employer deducts TDS on your salary, you might assume you have nothing more to do until July. That is almost always true — but not always. If you have income beyond your salary (interest, rent, capital gains, freelance work), and the tax on that extra income crosses ₹10,000 in a year, you need to pay advance tax. The first instalment is due 15 June 2026.

Missing it costs you 1% interest per month on the unpaid amount.

For informational purposes only. Tax rules are subject to change — verify at incometax.gov.in before acting. Consult a practising CA for advice specific to your situation.

What is advance tax and why does it exist?

The Indian income tax system operates on a "pay as you earn" principle. For salaried employees, the employer does this automatically through TDS. For income on which TDS is not deducted — or is deducted at a lower rate — the Income Tax Department requires you to pay tax in advance, spread across four instalments during the financial year itself, rather than all at once at the end.

This is advance tax. It applies to FY 2025-26 (the year you are earning income in), not to ITR filing which covers a past year.

The legal basis is Section 208 of the Income Tax Act.

Who needs to pay advance tax in FY 2025-26?

Rule: If your estimated tax liability for FY 2025-26, after deducting TDS already paid, exceeds ₹10,000 — you must pay advance tax.

For most salaried employees, TDS on salary covers the full liability and nothing more is needed. You need to check if you have any of the following:

One exception: Senior citizens (60+ years) who have no business or professional income are exempt from advance tax. They pay all taxes at the time of ITR filing. (Section 207, Income Tax Act)

What are the advance tax due dates for FY 2025-26?

Source: Income Tax Department — Tax Payment schedule

The percentages are cumulative — not per-instalment. So by June 15, you should have paid 15% of your full estimated tax for the year. By September 15, a total of 45% (which means you pay another 30% in that quarter).

◇ Quick check: The Q1 deadline (15 June 2026) is 3 weeks away. If you have FD interest, rental income, or sold shares/mutual fund units this year, estimate your extra tax now.

How to calculate your advance tax — a worked example

Situation: Rahul earns ₹18L CTC, in-hand after TDS deductions. He also has:

• FD interest: ₹80,000
• Rent received from a property: ₹2,40,000/year (no TDS deducted by tenant who is an individual)

Step 1: Estimate total taxable income for FY 2025-26

Step 2: Calculate tax under new tax regime (FY 2025-26 slabs)

Step 3: Subtract TDS already deducted

Assume Rahul's employer deducted TDS of ₹1,10,000 on salary. Bank deducted ₹8,000 TDS on FD interest (10% of ₹80,000).

Total TDS = ₹1,18,000

Net tax payable = ₹1,39,984 − ₹1,18,000 = ₹21,984

This is above ₹10,000, so Rahul must pay advance tax.

Step 4: Calculate each instalment

Note: All figures are illustrations. Round up slightly to avoid falling short of the threshold.

What happens if you miss an advance tax instalment?

Two sections apply:

Section 234C — Interest for deferment of advance tax

If you pay less than the required cumulative percentage by a due date, you pay 1% simple interest per month on the shortfall, for the following periods:

• Short payment at June 15 → interest for 3 months
• Short payment at September 15 → interest for 3 months
• Short payment at December 15 → interest for 3 months
• Short payment at March 15 → interest for 1 month

⚠ Common mistake: Many people think skipping the June instalment and paying the full 45% in September avoids Section 234C. It does not. Interest is still charged on the shortfall at June 15 for those 3 months.

Section 234B — Interest for default in payment of advance tax

If you have paid less than 90% of your total tax liability as advance tax by 31 March 2027, Section 234B applies. Interest at 1% per month is charged from April 1, 2027 until you actually pay the balance.

Source: Section 234B and 234C, Income Tax Act — Canara HSBC explanation

Special rule for capital gains

Capital gains are unpredictable — you cannot know in January what you will sell in August. The Income Tax Department accounts for this:

If you realise capital gains (sell shares or mutual fund units) after a due date has passed, you are not penalised for not including them in the earlier instalment. You include them in the next remaining instalment, or by 15 March if no instalment remains.

Example: Rahul sells mutual fund units in October 2026, realising ₹50,000 in LTCG. Since the June and September instalments have already passed, he adds this to the December instalment (adjusting upward) and the March instalment if needed.

Source: Zerodha Z-Connect — All you need to know about advance tax

How to pay advance tax online

You will receive a challan counterfoil — save it. This is your proof of payment and is used when filing ITR.

Bottom line

• Advance tax applies if your net tax liability after TDS exceeds ₹10,000 for the year
• Even salaried employees need to pay it if they have FD interest, rent, capital gains, or freelance income
• First instalment: 15 June 2026 — pay 15% of your estimated total tax
• Missing it triggers Section 234C interest at 1% per month on the shortfall
• Capital gains realised after a due date are added to the next remaining instalment
• Senior citizens with no business income are exempt from advance tax

Frequently asked questions

Q: I am a salaried employee. My only extra income is ₹35,000 in FD interest this year. Do I need to pay advance tax?

A: Check if the tax on that ₹35,000 — after accounting for TDS already deducted by your bank — exceeds ₹10,000. At a 20% slab, tax on ₹35,000 is ₹7,000. If the bank deducted 10% TDS (₹3,500), your shortfall is ₹3,500 — below the ₹10,000 threshold. You can pay it at ITR time without penalty. But if your slab is 30%, the shortfall is larger — calculate for your own situation.

Q: What if I underestimate my income and pay too little advance tax?

A: You pay Section 234C interest on the shortfall for each quarter. Top up in subsequent instalments to minimise the interest. At year end, any balance is paid via self-assessment tax (Challan 280, Code 300) before filing ITR.

Q: Can I pay all four instalments in one go in March to save time?

A: You can pay 100% by 15 March and avoid Section 234B (which applies if you pay less than 90% by year end). But you will still attract Section 234C interest for the earlier instalments that were short-paid. It is cheaper to pay quarterly.

Q: Do I pay advance tax for the new tax regime differently than the old regime?

A: No — the instalment schedule and interest rules are identical. Only the tax calculation changes based on which regime you choose.

Q: Where do I find my TDS amount to subtract from my estimated tax?

A: Check your AIS (Annual Information Statement) on the e-filing portal — it shows TDS deducted by all sources (employer, banks, others) in real time. Log in at incometax.gov.in → e-Filing → AIS.

Sources: Section 208, 234B, 234C — Income Tax Department · ClearTax — Advance Tax guide · Zerodha Z-Connect — Advance tax explained

Last verified: May 2026, FY 2025-26 (AY 2026-27). Tax rules change — confirm current rules at incometax.gov.in before acting.