Advance Tax: The 15 December Instalment, Who Must Pay and How to Calculate It

The 15 December deadline

Advance tax is income tax paid during the year as you earn, instead of in one lump sum when you file the return. Tax year 2026-27 (April 2026 to March 2027) is the first year governed by the Income-tax Act, 2025, which came into force on 1 April 2026 and renumbered the advance tax rules.

The third instalment is due on 15 December 2026. By that date, the total you have paid for the year should be at least 75% of your estimated advance tax. The full schedule, which is cumulative, is:

• 15 June: at least 15%
• 15 September: at least 45%
• 15 December: at least 75%
• 15 March: 100%

Who must pay advance tax

Under section 404 of the new Act, advance tax applies when your estimated tax for the year, after TDS and TCS, is ₹10,000 or more. This catches business owners, professionals and freelancers, as well as salaried people with significant rental income, interest, dividends or capital gains that their employer's TDS does not cover.

There are two main exceptions:

• A resident senior citizen (aged 60 or more) with no income from business or profession does not have to pay advance tax
• Businesses and professionals on the presumptive scheme under section 58 can pay the whole amount in one instalment by 15 March, so 15 December is not a deadline for them

How to calculate the December payment

Start with a realistic estimate of your income for the full year, not just what you have earned so far. Add income under every head: salary, house property, business or profession, capital gains and other sources. Subtract the deductions you are entitled to under your chosen regime, compute tax on the result, then subtract any rebate and add surcharge and the 4% health and education cess.

From that total, subtract TDS and TCS already deducted or expected, and any relief for foreign tax. What is left is your advance tax for the year. Take 75% of it, subtract what you paid by 15 September, and the balance is your December payment.

An example. Suppose your estimated tax for 2026-27 is ₹2,00,000 and TDS will cover ₹40,000, leaving advance tax of ₹1,60,000. By 15 December you need ₹1,20,000 paid in total (75%). If you paid ₹72,000 (45%) by 15 September, pay ₹48,000 by 15 December.

What a shortfall costs

Two interest charges apply, both simple interest at 1% per month or part of a month:

• Section 425 (formerly 234C): if less than 75% is paid by 15 December, interest runs on the shortfall for 3 months. In the example, paying ₹1,00,000 instead of ₹1,20,000 costs ₹20,000 × 1% × 3 = ₹600
• Section 425 also charges 1 month's interest if less than 100% is paid by 15 March
• Section 424 (formerly 234B): if total advance tax paid is less than 90% of the tax assessed, interest runs from 1 April until you pay the balance
• Tax paid on or before 31 March still counts as advance tax for the year

Gains that arrive late in the year

Some income is hard to predict: capital gains, dividends, lottery or betting winnings, and business income that arises for the first time in the year. If a December shortfall is caused by income of this kind, section 425 interest is not charged on it, provided you pay the tax on that income in the remaining instalments after it arises. If you sell shares or property in November, include the gain in your 15 December or 15 March payment.

How to pay

Pay through e-Pay Tax on the income tax e-filing portal. Choose the Income-tax Act, 2025 and tax year 2026-27, and select Advance Tax as the payment type, not Self-Assessment Tax. Companies pay under Corporation Tax; others under Income-tax (other than companies). You can pay by net banking, card, UPI or NEFT/RTGS.

Save the challan. You will need the BSR code, challan serial number and date when you file your return. If 15 December falls on a bank holiday, payment on the next working day is treated as on time. If your income changes later in the year, simply adjust the remaining instalments; there is nothing to file.

How FBS Advisory can help

Our team reviews your income for the year before each instalment, works out the advance tax under the regime that suits you, and keeps a record ready for your return. Talk to us before 15 December if your income has changed since September.