Advance Tax & Self-Assessment Computation

The threshold is on the net income tax liability for the financial year — not on gross income. The computation starts with your estimated total income from all sources, applies deductions (Chapter VI-A, house property loss etc.), computes the tax at applicable rates (slab for individuals, flat rate for companies), adds surcharge and health and education cess, and then deducts TDS that you expect to receive. If this net tax payable figure is ₹10,000 or more, you are liable to pay advance tax in instalments. If TDS already covers most of your liability and the residual is below ₹10,000, there is no advance tax obligation for that year.

Section 234B applies when advance tax paid by 31 March is less than 90% of the assessed tax (the tax computed after filing the ITR). Interest runs at 1% per month (or part of month) on the shortfall from 1 April of the assessment year to the date the self-assessment tax is paid. Section 234C applies separately at each instalment deadline — it charges 1% per month for 3 months on the shortfall between what was paid cumulatively and the required cumulative percentage at that instalment date. Both charges run simultaneously. For example: if your assessed tax is ₹2,00,000 and you paid ₹1,20,000 advance tax (60%) by 15 March — 234B applies from 1 April on the ₹80,000 shortfall (since you paid less than 90%). Additionally, 234C applied at each instalment for underpayment at that date.

Yes. Capital gains from property sale are taxable income for the financial year in which the sale occurs. If you sold the flat in November (Q3), the long-term or short-term capital gain must be included in your advance tax estimate for the December instalment (75% cumulative). Failure to include it means you underpay in December. Section 234C interest applies from 16 December for 3 months on the shortfall, and then Section 234B applies from 1 April on any residual. PNPC re-estimates advance tax whenever a client reports a significant mid-year capital gain event — property sale, large equity exit, inheritance received.

For a variable-income professional, the approach is to make a conservative estimate at each instalment date based on actual income received to that point, project the remainder of the year, and compute the required advance tax. At June: estimate based on April–May billings and committed contracts. At September: revise using April–August actuals plus best estimate for October–March. At December: revise again with 9 months of actuals. At March: close to actual full-year income. It is better to overestimate slightly and receive a refund than to underestimate and face 234C interest. If your income is genuinely unpredictable, discuss with your CA whether presumptive taxation under Section 44ADA might be appropriate — it allows a single 15 March payment at 50% of gross receipts.

Taxpayers who opt for presumptive taxation under Section 44AD (eligible businesses, income declared at 8% or 6% of turnover) or Section 44ADA (eligible professionals, income declared at 50% of gross receipts) are not required to pay advance tax in instalments of 15%, 45%, and 75% during June, September, and December. They are required to pay 100% of advance tax in a single instalment by 15 March. If they pay after 15 March, Section 234B interest applies from 1 April. If they do not pay at all or pay short at 15 March, Section 234B runs on the shortfall. There is no 234C for the three interim instalments — only the March date matters.

Challan 280 requires you to state the assessment year for which the payment is made. Advance tax paid in FY 2025-26 is for Assessment Year 2026-27. A common error is quoting AY 2025-26 (the prior year) on a payment made in June 2025 — resulting in the credit being applied to a completed year rather than the current year. To correct this, a challan rectification request must be filed through the IT portal (e-Pay Tax section) or with the jurisdictional assessing officer within prescribed timelines (generally within 3 months of deposit for TIN-NSDL corrections). Until the correction is processed, the current-year advance tax balance remains short, and Section 234C/234B interest continues to accrue.

Senior citizens (60 years or above at any time during the financial year) who do not have income from business or profession are specifically exempt from advance tax under Section 207. They pay self-assessment tax (Section 140A) at the time of filing their ITR. If the self-assessment tax is paid before filing, no Section 234B interest applies. However, note that Section 207 applies only if income is not from business or profession — a senior citizen running a shop or consulting practice is not exempt and must pay advance tax on schedule. Interest income, rental income, pension, and capital gains do not constitute business or professional income for this purpose.

Yes. If the sum of advance tax paid plus TDS deducted exceeds your final assessed tax liability, the excess is a refund due to you. The refund is claimed when you file your ITR — the return itself shows the refund amount. The IT department processes refunds from CPC Bengaluru, typically within 30–90 days of filing for returns processed under Section 143(1). Refunds above ₹1,000 carry interest at 0.5% per month from 1 April of the assessment year to the date of refund under Section 244A — a small compensation but not a reason to deliberately over-pay. Pre-validate your bank account on the IT portal for direct credit.

Yes. Advance tax estimates can be revised upward at any instalment. The cumulative instalment amounts represent minimums — you can always pay more at any instalment if actual income is higher than estimated. If your company's profit was unexpectedly high in Q3, pay the revised 75% cumulative figure at December (not just what was originally planned). The excess paid at December is credited against March liability. There is no upper limit on advance tax payment. Section 234C only applies to underpayment — not overpayment.

Advance tax is paid in instalments during the financial year — before the year closes on 31 March — using Challan 280 with payment code 100. It is compulsory if net tax liability exceeds ₹10,000. Self-assessment tax is paid after the financial year ends, when you are filing your ITR, for any remaining tax liability that was not covered by advance tax and TDS. It is paid using Challan 280 with payment code 300. Section 234B interest runs on the amount that should have been paid as advance tax but was paid as self-assessment tax — from 1 April until the date of payment. The distinction matters: mislabelling advance tax as self-assessment tax (or vice versa) on the challan affects which year the credit applies to and whether interest runs.

No. Sections 234B and 234C interest are mandatory and non-discretionary. There is no provision under the Income Tax Act for the assessing officer, CIT(A), or any authority to waive these interest charges. They apply automatically to any shortfall and must be paid as part of the self-assessment tax before filing the ITR. The only way to avoid or minimise them is to pay advance tax correctly and on time. CBDT issues occasional circulars extending due dates (usually in years with natural disasters or system failures) — in those years, interest computation may be modified, but this is an exception rather than a rule.

Yes. Companies are subject to the same advance tax schedule under Section 211 — 15% by 15 June, 45% by 15 September, 75% by 15 December, 100% by 15 March. There is no company-specific schedule — the dates and percentages are identical. Companies are not eligible for the Section 207 senior-citizen exemption or the presumptive-taxation single-instalment option. Every company with a tax liability of ₹10,000 or more (after TDS and MAT credit if applicable) must pay in four instalments. For companies subject to Minimum Alternate Tax (MAT) under Section 115JB, advance tax is computed on the higher of normal tax or MAT.

For every advance tax payment: the Challan 280 receipt showing BSR code (bank branch code), challan serial number, payment date, amount, and payment type code (100 for advance tax). These details are essential because they are what reconciles your 26AS credit and what is entered in your ITR under the Schedule IT (tax payments). Verify within 5–7 days of payment that the challan credit appears in Form 26AS under the relevant assessment year. If it does not appear, the payment may have been applied to a different year, or the bank did not correctly upload the challan data — contact the bank or NSDL for correction before the next instalment.