Paying taxes at the end of the financial year can create a significant financial burden, especially for freelancers, consultants, business owners, startup founders, and investors with multiple income sources. To avoid this situation, the Income Tax Department requires eligible taxpayers to pay tax in instalments during the year itself. This system is known as advance tax. If your estimated tax liability exceeds ₹10,000 after considering TDS and TCS credits, advance tax payment becomes mandatory. Understanding the correct process can help you avoid interest penalties and stay fully compliant with tax regulations. This guide explains how to pay advance tax online, calculate your liability, choose the correct challan, avoid common mistakes, and resolve payment issues for FY 2026-27.
What is Advance Tax?
Advance tax is income tax paid during the financial year in instalments instead of paying the entire amount while filing the Income Tax Return (ITR). Taxpayers whose estimated tax liability exceeds ₹10,000 after deducting TDS and TCS generally need to pay advance tax. The concept is often referred to as the “pay-as-you-earn” system because taxpayers pay taxes as income is earned throughout the year.
Advance tax applies to:
- Business owners
- Freelancers
- Consultants
- Professionals
- LLPs
- Partnership firms
- Companies
- Investors earning capital gains
- Individuals with rental income
Resident senior citizens who do not have business or professional income are generally exempt from paying advance tax.
Who Needs to Pay Advance Tax?
Any taxpayer whose estimated tax liability exceeds ₹10,000 during the financial year must pay advance tax.
| Taxpayer Type | Advance Tax Applicable |
|---|---|
| Salaried Employees with Additional Income | Yes |
| Freelancers | Yes |
| Consultants | Yes |
| Business Owners | Yes |
| Partnership Firms | Yes |
| LLPs | Yes |
| Companies | Yes |
| Investors with Capital Gains | Yes |
| Resident Senior Citizens without Business Income | No |
Many salaried individuals assume advance tax is not applicable to them. However, if they earn rental income, interest income, capital gains, or freelance income that is not fully covered by TDS, advance tax may become mandatory.
Advance Tax Due Dates for FY 2026-27
Advance tax is paid in four instalments during the financial year.
| Due Date | Cumulative Tax Payable |
|---|---|
| 15 June 2026 | 15% |
| 15 September 2026 | 45% |
| 15 December 2026 | 75% |
| 15 March 2027 | 100% |
For example, if your estimated tax liability is ₹1,00,000:
| Due Date | Amount Required |
|---|---|
| 15 June | ₹15,000 |
| 15 September | ₹45,000 total |
| 15 December | ₹75,000 total |
| 15 March | ₹1,00,000 total |
Special Rule for Freelancers and Professionals
Professionals opting under Section 44ADA and businesses under Section 44AD can pay the entire advance tax in a single instalment on or before 15 March 2027.
How to Calculate Advance Tax
Before making any payment, estimating your tax liability correctly is important.
Step 1: Estimate Total Income
Include all expected income:
- Salary
- Business income
- Professional income
- Rental income
- Capital gains
- Interest income
- Other taxable income
Step 2: Calculate Tax Liability
Apply applicable income tax slab rates and calculate total tax.
Step 3: Add Surcharge and Cess
Add surcharge (if applicable) and 4% Health & Education Cess.
Step 4: Deduct TDS and TCS Credits
Check Form 26AS and AIS before reducing tax credits.
Step 5: Calculate Balance Tax
The remaining amount is your advance tax liability.
Calculating advance tax accurately is essential to avoid interest and penalties. For a detailed breakdown with practical examples, read our guide on How to Calculate Advance Tax for Business Owners in India.
Advance Tax Calculation Example
A consultant based in Gurgaon earns:
| Income Source | Amount |
|---|---|
| Salary Income | ₹20,00,000 |
| Consulting Income | ₹10,00,000 |
| Rental Income | ₹3,00,000 |
| Total Income | ₹33,00,000 |
Assume total tax liability equals ₹7,20,000.
| Particular | Amount |
|---|---|
| Total Tax Liability | ₹7,20,000 |
| Less: TDS by Employer | ₹4,00,000 |
| Advance Tax Payable | ₹3,20,000 |
Since the balance exceeds ₹10,000, advance tax payment becomes mandatory.
How to Pay Advance Tax Online
Step 1: Visit the Income Tax Portal
Open the Income Tax e-Filing Portal and select the e-Pay Tax option.
Step 2: Enter PAN and Mobile Number
You can proceed without logging into your account by entering:
- PAN
- Mobile Number
- OTP Verification
Step 3: Select Income Tax
Choose the “Income Tax” payment category.
Step 4: Select Tax Year
For FY 2026-27, choose:
| Field | Selection |
|---|---|
| Tax Year | 2026-27 |
| Minor Head | 100 – Advance Tax |
Step 5: Enter Tax Amount
Fill in the tax amount you wish to pay.
Step 6: Choose Payment Method
Available payment methods include:
- Net Banking
- UPI
- Debit Card
- NEFT
- RTGS
Step 7: Complete Payment
Authorize the transaction through your selected payment method.
Step 8: Download Challan
After successful payment, download and save the challan immediately.
Which Challan is Used for Advance Tax?
Advance tax is paid using Challan ITNS 280.
This challan is automatically generated through the Income Tax Portal after payment.
Important Challan Fields
| Field | Selection |
|---|---|
| Major Head | 0021 (Individuals, Firms, LLPs) |
| Major Head | 0020 (Companies) |
| Minor Head | 100 – Advance Tax |
| Tax Year | FY 2026-27 |
Advance Tax vs Self-Assessment Tax
Many taxpayers confuse advance tax with self-assessment tax.
| Particulars | Advance Tax | Self-Assessment Tax |
|---|---|---|
| Payment Timing | During Financial Year | After Financial Year |
| Purpose | Estimated Tax Payment | Remaining Tax Liability |
| Minor Head | 100 | 300 |
| Due Dates | Quarterly | Before ITR Filing |
Understanding the difference helps avoid challan selection errors.
Advance Tax Payment Methods
| Method | Best For | Notes |
|---|---|---|
| UPI | Small Payments | Quick and Convenient |
| Net Banking | Most Taxpayers | Reliable |
| Debit Card | Individuals | Subject to Limits |
| NEFT | Large Payments | Bank Processing Required |
| RTGS | Corporate Payments | High Value Transactions |
UPI Payment
UPI is ideal for smaller advance tax payments and provides instant confirmation.
Net Banking
The most commonly used and reliable payment method.
RTGS and NEFT
Suitable for large advance tax payments, particularly for businesses and companies.
Real-Life Advance Tax Examples
Freelancer Under Section 44ADA
| Particular | Amount |
|---|---|
| Gross Receipts | ₹18,00,000 |
| Presumptive Income | ₹9,00,000 |
| Tax Liability | ₹78,000 |
| Less TDS | ₹18,000 |
| Tax Payable | ₹60,000 |
Since Section 44ADA applies, the entire amount can be paid by 15 March.
Startup Founder
| Particular | Amount |
|---|---|
| Business Income | ₹35,00,000 |
| Capital Gains | ₹8,00,000 |
| Total Tax Liability | ₹10,14,000 |
| Less TDS | ₹1,50,000 |
| Advance Tax | ₹8,64,000 |
This liability must generally be paid according to the quarterly schedule.
Private Limited Company
| Particular | Amount |
|---|---|
| Estimated Profit | ₹75,00,000 |
| Tax Liability | ₹18.88 Lakh |
| Major Head | 0020 |
| Minor Head | 100 |
Corporate taxpayers should carefully estimate profits before every instalment.
Advance Tax for Businesses and Professionals in Gurgaon
Gurgaon is home to thousands of startups, consultants, IT professionals, founders, and high-income professionals.
Business owners operating in:
- Cyber City
- Udyog Vihar
- Golf Course Road
- Sohna Road
- DLF Phase Areas
often earn income from multiple sources, including salary, consulting fees, ESOPs, rental income, and capital gains.
This makes tax planning more complex and increases the likelihood of advance tax liability. Reviewing income before every due date helps avoid interest and ensures better cash flow management.
Top 10 Advance Tax Payment Mistakes
Selecting the Wrong Tax Year
A wrong tax year can result in payment being credited to another year.
Choosing Minor Head 300 Instead of 100
This causes payment to be treated as self-assessment tax.
Ignoring TDS Credits
Many taxpayers overpay because they fail to review Form 26AS.
Entering Incorrect PAN
Even one incorrect character can create tax credit issues.
Forgetting to Download the Challan
Always save the challan immediately after payment.
Missing Instalment Deadlines
Late payments may attract interest.
Underestimating Income
This often results in tax shortfalls.
Ignoring Capital Gains
Capital gains must be considered when calculating tax liability.
Using Incorrect Major Head
Individuals should not select company tax categories.
Not Reviewing AIS
Always verify whether the payment reflects in AIS.
Troubleshooting Advance Tax Payment Issues
Payment Deducted but Challan Not Generated
Wait 24 to 48 hours and check payment history on the portal.
Wrong Tax Year Selected
Apply for challan correction immediately.
Wrong Amount Paid
An additional payment can be made to cover the shortfall.
Duplicate Payment
Excess payment can generally be claimed as a refund during ITR filing.
Payment Not Showing in AIS
Allow up to 7 working days before raising a grievance.
Frequently Asked Questions
Yes. If additional income results in tax liability exceeding ₹10,000 after TDS adjustment, advance tax becomes applicable.
Advance tax is paid using Challan ITNS 280 with Minor Head 100.
Yes, advance tax can be paid through UPI using the Income Tax Portal.
Interest under Sections 234B and 234C may apply.
You can verify it through Form 26AS, AIS, or payment history on the Income Tax Portal.
Yes. Excess advance tax paid can be claimed as a refund while filing your ITR.
Freelancers opting for Section 44ADA can generally pay the entire amount by 15 March.
Minor Head 100 is the code used for advance tax payments.
Conclusion
Advance tax is an important compliance requirement for professionals, freelancers, business owners, investors, and companies whose estimated tax liability exceeds ₹10,000. Paying taxes on time not only helps avoid interest penalties but also improves financial planning throughout the year. Before making any payment, estimate your total income accurately, review TDS credits through Form 26AS and AIS, select the correct Tax Year and Minor Head, and download the challan immediately afterr payment. By following the correct process and reviewing your liability before every due date, you can stay compliant and avoid unnecessary tax complications during ITR filing.
