Advance tax check: Who must pay now and what missing the deadline can cost

With the 15 December instalment approaching, here is a clear guide on who must pay advance tax, how much is due, and the interest costs of missing the cut-off

As the 15 December advance tax deadline approaches, many taxpayers, particularly freelancers, investors and small business owners, must assess whether they fall within the ambit of advance tax and how much they are required to pay. Unlike salaried individuals, whose tax is typically deducted at source each month, those with irregular income often need to plan more actively to avoid interest charges and a large year-end burden.

 

Who needs to pay advance tax?

Advance tax is payable when the total estimated tax liability for the financial year exceeds Rs 10,000, after factoring in tax deducted at source.

 

Avnish Arora, executive director, direct tax, Forvis Mazars India, explains, “Advance tax is payable by any person, salaried or non-salaried, whose estimated total tax liability for the year is Rs 10,000 or more after adjusting for TDS. While salaried individuals usually meet this through monthly TDS, advance tax becomes necessary where TDS is insufficient.”

 

 

Some key points

Applies to all income types: Salary, business income, interest, capital gains, rental income and other sources.

 

Freelancers, traders and investors are typically most exposed, as their earnings may not attract regular TDS.

 

Resident senior citizens (60+) with no business or professional income are exempt.

 

Why the 15 December deadline matters

The 15 December instalment is the year’s most critical checkpoint. By this date, taxpayers must pay at least 75 per cent of their estimated annual tax liability.

 

Arora notes, “Missing this deadline attracts mandatory interest under Section 234C of the Income-tax Act, even if the balance tax is paid later while filing the return.”

 

Failure to pay sufficient tax by this stage not only triggers interest on the shortfall but may also lead to cash flow stress when filing returns, especially for those with volatile income streams such as capital gains or project-based earnings.

 

What happens if you miss the due date?

 

Missing an advance tax deadline leads to:

 

• Interest for deferment or shortfall under Section 234C. 
• Possible additional interest under Section 234B if the cumulative payments fall significantly short. 
• Higher lump-sum payout at the time of filing your income-tax return.

 

As Arora points out, “Any remaining tax after adjusting advance tax, TDS and other credits is paid as self-assessment tax at the time of filing the return. However, delay in paying advance tax results in interest for deferment and shortfall and can also lead to a heavy lump-sum outgo at the time of filing.”

 

With the 15 December deadline nearing, taxpayers should review their income estimates, compute their tax liability and ensure they meet the required 75 per cent threshold. Early compliance not only prevents interest charges but also smoothens cash flow for the rest of the financial year.