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The deadline to pay the third installment of Advance Tax for the Financial Year 2025–26 is approaching quickly. Taxpayers who are liable to pay advance tax must deposit 75% of their estimated annual tax by December 15, 2025. Failure to pay on time may lead to interest penalties under Sections 234B and 234C of the Income Tax Act, 1961.

What is Advance Tax and Why It Is Important?

Advance tax is a tax payment system where taxpayers are required to pay tax during the financial year in multiple installments instead of paying it at once while filing the Income Tax Return (ITR). It is also referred to as the ‘pay as you earn’ tax method.

If your net total tax liability (after deducting TDS) is ₹10,000 or more in a financial year, then paying advance tax becomes mandatory. The income can be from salary, business, profession, investments, or any other taxable source.

Timely payment of advance tax helps the government maintain cash flow and prevents taxpayers from paying large lump-sum amounts at the end of the year.

Advance Tax Installment Schedule (FY 2025–26)

This means that by December 15, taxpayers should have paid at least three-fourths of their annual tax liability.

Who Must Pay Advance Tax?

The following individuals and entities are required to pay advance tax if their total liability exceeds ₹10,000 after TDS deductions:

✔ Salaried Employees

Even though TDS is deducted from salary, employees who have additional income sources must pay advance tax separately. These additional incomes may include:

• Rental income

• Interest income from banks or deposits

• Freelancing or consultancy earnings

• Capital gains from stocks, property, cryptocurrency, F&O trading and mutual funds

✔ Professionals

Including doctors, lawyers, consultants, architects, chartered accountants, and designers.

✔ Business Owners and Traders

From small enterprises to large traders, including those trading in stock markets and derivatives.

✔ Investors

Those earning profit from stock market trading, mutual funds, futures & options (F&O), crypto investments, or corporate bonds.

Who Is Exempt from Paying Advance Tax?

You do not need to pay advance tax if:

• Your tax liability after TDS is below ₹10,000.

• You are a resident senior citizen (60+ years) who does not run a business or profession.

• All your income is already covered under TDS, such as pension and bank interest in special cases.

How to Calculate Advance Tax?

To estimate your advance tax, follow these steps:

1. Calculate your estimated total income for the financial year.

2. Subtract exemptions and deductions (80C/80D/HRA/LTA etc.)

3. Apply the appropriate income tax slab rate.

4. Subtract TDS already deducted.

5. If the balance amount is ₹10,000 or more, advance tax payment is required.

What If You Miss the Deadline?

If the taxpayer does not deposit 75% of the advance tax by December 15, the Income Tax Department will levy interest penalties under Section 234B and Section 234C until the pending amount is cleared.
For freelancers, traders, and investors with fluctuating income, this extra interest can be financially burdensome.

Key Highlights

• December 15, 2025 is the deadline for the third installment.

• 75% of the total estimated tax must be paid by this date.

• Interest and penalties apply for delayed payments.

• Mandatory if total tax liability exceeds ₹10,000 after TDS.

Final Reminder

Taxpayers should calculate and pay advance tax on time to avoid unnecessary penalties and financial pressure at the end of the financial year. Those earning extra income beyond salary should review their tax position immediately and complete payment well before the due date.