Advance tax for businesses

When advance tax becomes relevant

Under section 404 of the Income-tax Act, 2025, advance tax applies where the amount computed under the advance-tax provisions is ₹10,000 or more. Assess the taxpayer, income and applicable exceptions before deciding that payment is required.

The calculation should cover relevant income for the year, not only the latest month’s operating profit. Reconcile the tax estimate with eligible deductions, credits and the applicable tax regime.

Standard instalment schedule

For the standard four-instalment schedule under section 408, the cumulative amounts are:

• By 15 June: at least 15% of the calculated advance tax.
• By 15 September: at least 45%, less earlier instalments.
• By 15 December: at least 75%, less earlier instalments.
• By 15 March: the full amount, less earlier instalments.

Special payment schedule

Section 408(2) provides a single 15 March payment for taxpayers declaring profits under section 58(2), Table serial numbers 1 or 3. Check that the taxpayer actually falls within those provisions; do not apply the exception to every business described as presumptive.

Payments by 31 March are treated as advance tax for that year, but that treatment does not make the earlier instalment deadlines optional. Review any shortfall and applicable interest separately.

Prepare the forecast

• Start with actual accounts and a forecast for the remaining year.
• Identify non-recurring income, capital transactions and tax adjustments.
• Calculate tax under the applicable regime, including relevant additions and reliefs.
• Reconcile tax deducted or collected and earlier advance-tax payments under the statutory computation.
• Record the assumptions, reviewer and date of each forecast.

Example: calculate the incremental payment

Assume the calculated annual advance tax is ₹1,00,000 and ₹15,000 was paid in June. With an unchanged estimate, the September cumulative requirement is ₹45,000, so the additional payment is ₹30,000. If the annual estimate changes, recalculate the cumulative requirement before deducting previous payments.

Use the correct period and payment particulars

Advance tax for income in Tax Year 2026–27 is governed by the Income-tax Act, 2025. Earlier-year liabilities remain subject to the transition rules. Select the correct Act, period, taxpayer and payment category in the official payment workflow.

Retain the challan and confirm that the payment is reflected against the intended account. Reconcile it to the ledger and the next instalment working paper.

Review exceptions and unexpected income

Check whether a taxpayer-specific exemption applies and whether an unexpected income event has special interest treatment under the relevant provision. Keep the timing and calculation evidence. A late forecast update is not by itself a statutory exception.

Assign a calendar owner and obtain revised estimates before each due date. Escalate material acquisitions, asset sales, unusual receipts and changes in profitability to the person preparing the calculation.