You’ve just finished another financial year, and as you gear up to file your Income Tax Return (ITR), you might feel a sense of calm, assuming your employer handled all your tax deductions. But hold on a second! What if you’re among the many salaried individuals who earn a little extra from other sources, like fixed deposits, bonds, or even rental income? If so, you could be in for a surprise: an unexpected tax bill.
The Common Pitfall
Employers are diligent about deducting Tax Deducted at Source (TDS) from your monthly salary based on your tax slab. They then deposit this advance tax with the Income Tax Department. However, a crucial detail often gets missed: employers typically only consider your salary when calculating this advance tax.
If you have additional income streams beyond your salary, such as:
- Interest from fixed deposits or savings accounts
- Earnings from bonds
- Rental income
- Capital gains
…the onus is on you to estimate the tax liability on these amounts and pay advance tax if it exceeds ₹10,000 annually. Overlooking this can lead to penalties and a higher tax bill when you finally file your ITR.
The Income Tax Department is clear: “For salaried individuals, advance tax is mostly taken care of through TDS by employers. But other forms of income, such as interest on savings bank accounts, fixed deposits, rental income, bonds, or capital gains, increase the tax liability. Tax liability needs to be estimated beforehand. If tax amounts to more than ₹10,000/- per year, taxpayers need to pay advance tax in quarterly instal1lments (June, September, December, and March).”
Understanding Advance Tax Due Dates (FY 2025-26)
To avoid penalties, you need to pay your advance tax in installments throughout the financial year:
- By June 15, 2025: Pay 15% of your estimated advance tax liability.
- By September 15, 2025: Pay 45% of your estimated advance tax liability (this includes the amount already paid).
- By December 15, 2025: Pay 75% of your estimated advance tax liability (cumulative).
- By March 15, 2026: Pay 100% of your estimated advance tax liability (cumulative).
What Happens if You Miss a Payment?
Paying advance tax is mandatory if your tax liability on additional income is over ₹10,000. If you fail to pay or underpay by the due dates, you’ll incur interest along with your tax amount.
Under Section 234C of the Income Tax Act, here’s how the interest on delay is calculated:
- For June 15 shortfall: If the advance tax paid by this date is less than 15% of the total, you’ll pay interest at 1% per month for 3 months on the shortfall.
- For September 15 shortfall: If the cumulative advance tax paid is less than 45%, you’ll pay interest at 1% per month for 3 months on the shortfall from the 45% mark.
- For December 15 shortfall: If the cumulative advance tax paid is less than 75%, you’ll pay interest at 1% per month for 3 months on the shortfall from the 75% mark.
- For March 15 shortfall: If the cumulative advance tax paid is less than 100%, you’ll pay interest at 1% per month for 1 month on the remaining unpaid amount.
Don’t Make This Mistake!
The next important deadline for paying up to 45% of your advance tax for FY 2025-26 is September 15, 2025.
If you’re a salaried individual with other income sources where your employer isn’t deducting TDS, take a moment to estimate your total tax liability now. Paying your advance tax on time is a simple step that can save you from unexpected interest payments and a disappointing tax surprise later!