Library / Income-tax Act, 2025: The Professional's Master Guide

37. Advance Tax, Interest and Fees

37.1 Advance tax (sections 403 to 411)

Payable if estimated tax after TDS and TCS is Rs. 10,000 or more. A resident senior citizen without business or professional income is exempt.

Due date	Cumulative amount
15 June	15%
15 September	45%
15 December	75%
15 March	100%
Presumptive cases (section 58)	100% by 15 March

Illustration 141: Shortfall

Rohit, a freelancer, has assessed tax of Rs. 2,00,000 but paid only Rs. 50,000 in advance tax. Since he paid less than 90%, section 424 (old 234B) applies.

He pays the balance with his return on 31 July 2027. Interest = 1% x 1,50,000 x 4 months (April to July) = Rs. 6,000, plus interest under section 425 for missed instalments.

37.2 Interest (sections 423 to 426) and fees (sections 427, 428)

Default	New	Old	Consequence
Late return	423	234A	1% a month on unpaid tax from due date
Advance tax below 90% of assessed tax	424	234B	1% a month on shortfall from 1 April after the tax year
Short or late instalments	425	234C	1% a month for 3 months (1 month for March)
Excess refund	426	234D	0.5% a month
Late TDS or TCS statement	427	234E	Rs. 200 a day up to tax amount
Late return	428	234F	Rs. 5,000; Rs. 1,000 if income up to Rs. 5 lakh
Interest on refunds to taxpayer	437	244A	0.5% a month

37.3 Computing advance tax and interest under section 425

Illustration 142: Instalments and interest

Manoj, a consultant (not presumptive), estimates tax after TDS for Tax Year 2026-27 at Rs. 4,00,000. His cumulative advance tax payments are: 15 June Rs. 40,000; 15 September Rs. 1,50,000; 15 December Rs. 2,50,000; 15 March Rs. 3,90,000. Assessed tax (after TDS) turns out to be Rs. 4,00,000.

Due date	Required (cumulative)	Paid (cumulative)	Shortfall	Interest
15 June (15%, safe if 12% paid)	60,000	40,000 (10%)	20,000	20,000 x 1% x 3 = 600
15 September (45%, safe if 36% paid)	1,80,000	1,50,000 (37.5%)	Nil (safe harbour)	Nil
15 December (75%)	3,00,000	2,50,000	50,000	50,000 x 1% x 3 = 1,500
15 March (100%)	4,00,000	3,90,000	10,000	10,000 x 1% x 1 = 100
Total interest under section 425				2,200

Section 424 does not apply because Rs. 3,90,000 is more than 90% of the assessed tax. The balance of Rs. 10,000 plus interest must be paid as self assessment tax before filing the return.

37.4 Points to remember

Estimated tax for advance tax purposes is after deducting TDS and TCS expected during the year.
Capital gains, winnings and dividends that arise after an instalment date are not counted for the earlier instalments if the remaining instalments are paid after they arise.
Interest is rounded: shortfall is rounded down to the nearest multiple of Rs. 100, and a fraction of a month counts as a full month for sections 423 and 424.
Companies must also take MAT into account for advance tax.

Chapter summary

• Payable if tax is Rs. 10,000 or more; instalments of 15%, 45%, 75% and 100%.

• Interest under sections 423, 424 and 425 at 1% a month.

• Late return fee Rs. 5,000 (Rs. 1,000 for small incomes).