Advance tax is the income tax paid in instalments during the financial year in which the income is earned, rather than as a lump sum after the year ends. Under Section 208 of the Income Tax Act, every person whose estimated tax liability for the year exceeds Rs 10,000 (after deducting TDS) is required to pay advance tax. This provision applies to freelancers, consultants, self-employed professionals, and individuals with significant income from capital gains, rent, or interest that is not subject to adequate TDS.
The Four Due Dates for FY 2026-27
Advance tax must be paid in four instalments across the financial year. The first instalment of 15% of the estimated annual tax liability is due by 15 June 2026. The second instalment, bringing the cumulative payment to 45%, is due by 15 September 2026. The third instalment, bringing the total to 75%, is due by 15 December 2026. The final instalment of the remaining 25% (taking the total to 100%) is due by 15 March 2027. Taxpayers who have opted for the presumptive taxation scheme under Sections 44AD or 44ADA have the option to pay the entire advance tax in a single instalment by 15 March.
It is important to note that these are cumulative percentages. If your estimated tax liability is Rs 2,40,000 for the year, you must pay Rs 36,000 by 15 June, an additional Rs 72,000 by 15 September (total Rs 1,08,000), an additional Rs 72,000 by 15 December (total Rs 1,80,000), and the remaining Rs 60,000 by 15 March.
How to Estimate Your Tax Liability
For freelancers and professionals, estimating annual income accurately in June can be challenging since only two months of data are available. A practical approach is to project based on the previous year's income adjusted for known changes, active client contracts and their expected billing over the year, and any anticipated capital gains from planned asset sales. As the year progresses and actual income becomes clearer, adjust subsequent instalment amounts accordingly. There is no penalty for overestimating and paying more advance tax than ultimately required, as the excess is refunded with interest.
The estimation should account for all deductions you plan to claim, whether under the old or new regime. Under the new regime, only the standard deduction of Rs 75,000 (if applicable) and employer NPS contributions are available, making the calculation simpler. Under the old regime, factor in 80C, 80D, 80CCD(1B), and any other deductions.
Interest Penalties for Non-Payment or Short Payment
Section 234B imposes interest at 1% per month (simple interest) on the shortfall if total advance tax paid is less than 90% of the assessed tax. The interest is charged from 1 April of the assessment year until the date of actual tax payment or assessment. Section 234C imposes interest at 1% per month for each instalment that falls short of the prescribed cumulative percentage. For example, if you pay only 10% by 15 June instead of 15%, interest under 234C is levied on the 5% shortfall for three months (June to September).
The combined penalty can be substantial. A freelancer with a Rs 3 lakh tax liability who pays the entire amount only at the time of ITR filing in July 2027 would face approximately Rs 36,000 in interest under 234B and an additional Rs 15,000-18,000 under 234C, totalling over Rs 50,000 in avoidable interest charges.
Practical Tips for Freelancers
Set aside 25-30% of every freelance payment received into a separate tax savings account. Review your projected income quarterly before each advance tax due date and recalculate the instalment amount. Factor in TDS already deducted by clients (visible on Form 26AS and AIS) to avoid overpayment. If you receive a large one-time payment or capital gain in any quarter, make an additional advance tax payment immediately rather than waiting for the next instalment date. Use the Oquilia Advance Tax Calculator to estimate each instalment based on your projected income and TDS credits.
Source
Sections 208, 209, 234B, 234C of the Income Tax Act; CBDT Guidelines