Advance Tax
Income tax paid in instalments during the financial year rather than as a lump sum at the end.
Formula
Instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March, cumulative of the estimated liability
Unit
₹
In depth
Advance tax is payable when the total liability after tax deducted at source exceeds ₹10,000 in a year, which almost any active trader or investor with meaningful gains will cross. Shortfalls attract interest under Sections 234B and 234C, computed monthly, so underestimating is expensive rather than merely inconvenient. Capital gains are difficult to forecast, so the rules permit paying the tax on a gain in the instalment following its realisation rather than requiring it to have been anticipated. Senior citizens without business income are exempt from advance tax entirely.
Worked example
A ₹5,00,000 gain realised in November attracts tax payable in the 15 December instalment. Deferring it to March triggers interest under Section 234C for the intervening period, at 1% a month on the shortfall.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Advance Tax” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.