A step-by-step guide for salaried employees, freelancers, business owners, and SME directors — calculate your Q2 advance tax instalment accurately and pay before the deadline to avoid compounding interest.
Most taxpayers in India know about the September 15 advance tax deadline. Far fewer know exactly how to calculate the correct amount — or understand why getting it wrong in September is more expensive than missing any other instalment during the year.
The second advance tax instalment requires a cumulative payment of 45% of your estimated annual tax by 15 September. That means it is not just the tax on Q2 income. It accounts for Q1 income too, less whatever you paid in June. If you underpaid in June, September catches that up — with interest running from June 15, not from September 15.
This guide gives you the calculation framework, three worked examples by taxpayer type, the exact payment steps on the Income Tax portal, and the interest calculation for anyone who has already missed the June instalment.
ADVISORY
At a Glance: Advance Tax FY 2026-27
Who must pay: Any taxpayer whose estimated income tax liability exceeds ₹10,000 for FY 2026-27 after TDS credits
September 15 requirement: Cumulative 45% of estimated annual tax paid by 15 September 2026
Governing provision: Sections 403–410 of the Income Tax Act, 2025 (formerly Sections 207–211 of the old Act)
Interest for short payment: 1% per month under Section 234C (formerly 234C of old Act) on the shortfall
Payment method: Online via Income Tax e-filing portal — Challan 280, Tax Year 2026-27, Minor Head 100 (Advance Tax)
Presumptive taxpayers (44AD/44ADA): Can pay 100% as single instalment by 15 March 2027 — no quarterly obligation
Who Must Pay Advance Tax?
Advance tax applies broadly — not just to business owners. Here is the complete picture:
You must pay advance tax if:
- Your estimated total income tax for FY 2026-27 exceeds ₹10,000 after TDS. This includes TDS deducted by your employer, banks, tenants, and any other deductors.
- You have income that is not covered by TDS — rental income, business profit, freelance income, FD interest, dividend income, or capital gains.
- You are a salaried employee who switched jobs during the year and the new employer is not accounting for the previous employer’s TDS.
- You have made capital gains in FY 2026-27 that were not anticipated when June’s advance tax was paid.
You are exempt from advance tax if:
- You are a senior citizen (60 years or above) with no income from business or profession — fully exempt regardless of income level.
- You are a small business or professional under presumptive taxation (Section 44AD or 44ADA). You can pay 100% of advance tax as a single instalment by 15 March 2027. No quarterly payments required.
- Your entire tax liability is covered by employer TDS. If TDS deducted by your employer equals or exceeds your full tax, no separate advance tax payment is needed.
IMPORTANT WARNING
Presumptive taxation exemption does NOT apply to Section 44AE (goods carriage vehicles).
Taxpayers under Section 44AE must pay advance tax in the standard four-instalment schedule like all other taxpayers — not as a single March payment. This is a common mistake for transport business owners.
The Four-Instalment Schedule for FY 2026-27
Advance tax is paid in four cumulative instalments. The percentages are cumulative — each instalment includes the total paid so far, not just the current quarter’s share.
| Instalment | Due Date | Cumulative % of Annual Tax | What This Means |
| 1st | 15 June 2026 | At least 15% | Pay 15% of your estimated annual tax liability by June 15 |
| 2nd | 15 Sep 2026 | At least 45% | Cumulative total paid must reach 45% — including June payment |
| 3rd | 15 Dec 2026 | At least 75% | Cumulative total paid must reach 75% — including June and September |
| 4th | 15 Mar 2027 | 100% | Full annual tax liability paid — any balance cleared here |
Note on capital gains:
If capital gains arise after a particular instalment date, you can include the tax on those gains in the remaining instalments without attracting Section 234C interest for the earlier missed instalments. For example, if you sell a property in August 2026, you do not need to have paid the tax on those gains by June — it can be included in September and beyond.
How to Calculate Your September 15 Advance Tax Payment
Follow these six steps to calculate exactly how much to pay by 15 September 2026.
1. Estimate your total income for FY 2026-27
Add up all income you expect to earn between April 2026 and March 2027:
- Salary: Your expected gross salary for the full year (not just April–September)
- Business/professional income: Estimated net profit for the full year based on Q1 actual and projected Q2–Q4
- Rental income: Annual rental receipts, net of municipal taxes paid
- Capital gains: Any gains already realized (shares, mutual funds, property) plus any anticipated before March 2027
- Interest income: FD interest, savings account interest, bond interest for the full year
2. Deduct eligible deductions and exemptions
Under whichever regime you have chosen for FY 2026-27:
New regime: Deduct ₹75,000 standard deduction (salaried), employer NPS contribution (Section 80CCD(2)), and any other specific exemptions available under the new regime.
Old regime: Deduct all eligible amounts — 80C (up to ₹1.5 lakh), 80D, HRA exemption, home loan interest (Section 24b, up to ₹2 lakh for self-occupied), NPS (80CCD(1B)), and any other applicable deductions.
Compute your taxable income.
3. Calculate the tax on taxable income
Apply the appropriate tax slabs for FY 2026-27 to your estimated taxable income:
New regime slabs: Nil up to ₹4L | 5% on ₹4L–₹8L | 10% on ₹8L–₹12L | 15% on ₹12L–₹16L | 20% on ₹16L–₹20L | 25% on ₹20L–₹24L | 30% above ₹24L
Old regime slabs: Nil up to ₹2.5L | 5% on ₹2.5L–₹5L | 20% on ₹5L–₹10L | 30% above ₹10L
Add 4% health and education cess on the total tax. Add surcharge if income exceeds ₹50 lakh.
Apply Section 87A rebate if applicable: New regime: up to ₹60,000 if taxable income ≤ ₹12 lakh. Old regime: up to ₹12,500 if taxable income ≤ ₹5 lakh.
4. Subtract TDS already deducted or expected for the full year
TDS is a credit against your advance tax obligation. Deduct:
- Employer TDS: Projected TDS from Form 16 for the full year (ask your employer for the projected TDS figure)
- Bank TDS (Section 194A): TDS on FD interest, typically 10% if PAN is provided
- TDS on rent received (Section 194I): If your tenant deducts TDS on rent paid to you
- TCS received: Any TCS collected by sellers from whom you purchased goods
This gives you your net advance tax liability for the year. If this figure is below ₹10,000, no advance tax is required.
5. Calculate what you must pay by 15 September
Your September payment = 45% of net advance tax liability − what you already paid in June.
Formula: September payment = (Net annual tax liability × 45%) − June payment made
- If you underpaid in June: The shortfall from June also attracts interest from 15 June. You should make up the June shortfall in September to stop the interest from compounding further.
- If you overpaid in June: The excess counts toward the 45% requirement — reduce September payment accordingly. No refund for over payment at instalment stage; excess is adjusted at ITR filing.
6. Pay online via Income Tax e-filing portal
Go to incometax.gov.in → e-File → e-Pay Tax → New Payment → Income Tax. Select:
- Tax Year: 2026-27
- Type of Payment — Minor Head: 100 — Advance Tax
- Assessment Year: 2027-28
Enter the tax amount under the relevant heads (income tax, surcharge if applicable, cess). Choose your payment method (net banking, UPI, debit card, NEFT/RTGS). Download and save the challan immediately after payment — note the CIN (Challan Identification Number). You will need it for ITR filing.
Three Worked Examples: Calculate Your September Payment
Use these examples as templates. Replace the figures with your own estimated income and deductions.
Example 1: Rajan, Salaried Employee with Rental Income — ₹18 lakh salary + ₹4.8 lakh annual rent
| Rajan’s Advance Tax Calculation — New Tax Regime | |
| Gross Salary (FY 2026-27 estimated) | ₹18,00,000 |
| Less: Standard Deduction | ₹75,000 |
| Annual Rental Income | ₹4,80,000 |
| Less: 30% standard deduction on rent | ₹1,44,000 |
| Estimated Taxable Income | ₹20,61,000 |
| Tax on ₹20,61,000 (new regime) | |
| Nil on ₹4 lakh | ₹0 |
| 5% on ₹4L (₹4L–₹8L) | ₹20,000 |
| 10% on ₹4L (₹8L–₹12L) | ₹40,000 |
| 15% on ₹4L (₹12L–₹16L) | ₹60,000 |
| 20% on ₹4L (₹16L–₹20L) | ₹80,000 |
| 25% on ₹61,000 (₹20L–₹20.61L) | ₹15,250 |
| Total Tax Before Cess | ₹2,15,250 |
| Add: 4% Health & Education Cess | ₹8,610 |
| Total Tax Liability | ₹2,23,860 |
| Less: Employer TDS (projected full year) | ₹1,60,000 |
| Less: TDS on Rent (tenant deducts 5%) | ₹24,000 |
| Net Advance Tax Liability | ₹39,860 |
| Advance Tax Due by 15 June (15%) | ₹5,979 |
| Rajan paid in June | ₹6,000 |
| Cumulative 45% required by 15 September | ₹17,937 |
| Less: June payment made | ₹6,000 |
| September Payment Due | ₹11,937 |
Rajan’s total tax is modest because employer TDS covers most of his liability. His September payment is under ₹12,000 — but if he skips it, interest at 1% per month runs on the ₹11,937 shortfall from September 15 onwards.
Example 2: Meera, Freelance Consultant — Estimated ₹28 lakh net professional income
| Meera’s Advance Tax Calculation — Old Tax Regime | |
| Estimated Professional Income (FY 2026-27) | ₹28,00,000 |
| Less: Section 80C (LIC + PPF) | ₹1,50,000 |
| Less: Section 80D (health insurance) | ₹25,000 |
| Less: Section 80CCD(1B) (NPS) | ₹50,000 |
| Taxable Income | ₹25,75,000 |
| Tax on ₹25,75,000 (old regime) | |
| Nil on ₹2.5 lakh | ₹0 |
| 5% on ₹2.5L (₹2.5L–₹5L) | ₹12,500 |
| 20% on ₹5L (₹5L–₹10L) | ₹1,00,000 |
| 30% on ₹15.75L (above ₹10L) | ₹4,72,500 |
| Total Tax Before Cess | ₹5,85,000 |
| Add: 4% Health & Education Cess | ₹23,400 |
| Total Tax Liability | ₹6,08,400 |
| Less: TDS deducted by clients (10%) | ₹2,80,000 |
| Net Advance Tax Liability | ₹3,28,400 |
| Cumulative 15% due by 15 June | ₹49,260 |
| Meera paid in June | ₹45,000 |
| June shortfall (interest runs from 15 Jun) | ₹4,260 |
| Cumulative 45% required by 15 September | ₹1,47,780 |
| Less: June payment made | ₹45,000 |
| September Payment Due | ₹1,02,780 |
Meera underpaid in June by ₹4,260. That shortfall has been attracting 1% per month interest since 15 June — approximately ₹85 in interest for the June-to-September period. Her September payment of ₹1,02,780 brings her to the 45% cumulative threshold and stops the June shortfall interest from compounding.
Example 3: Ashok, SME Owner — Manufacturing business, estimated ₹50 lakh profit
| Ashok’s Advance Tax Calculation — New Tax Regime | |
| Estimated Business Profit (FY 2026-27) | ₹50,00,000 |
| Less: Deductions available under new regime | ₹0 |
| Taxable Income | ₹50,00,000 |
| Tax on ₹50,00,000 (new regime) | |
| Nil on ₹4 lakh | ₹0 |
| 5% on ₹4L (₹4L–₹8L) | ₹20,000 |
| 10% on ₹4L (₹8L–₹12L) | ₹40,000 |
| 15% on ₹4L (₹12L–₹16L) | ₹60,000 |
| 20% on ₹4L (₹16L–₹20L) | ₹80,000 |
| 25% on ₹4L (₹20L–₹24L) | ₹1,00,000 |
| 30% on ₹26L (above ₹24L) | ₹7,80,000 |
| Total Tax Before Cess + Surcharge | ₹10,80,000 |
| Add: 10% Surcharge (income ₹50L–₹1 Cr) | ₹1,08,000 |
| Add: 4% Health & Education Cess | ₹47,520 |
| Total Tax Liability | ₹12,35,520 |
| Less: TDS on business receipts | ₹0 |
| Net Advance Tax Liability | ₹12,35,520 |
| Cumulative 15% due by 15 June | ₹1,85,328 |
| Ashok paid in June | ₹1,85,000 |
| Cumulative 45% required by 15 September | ₹5,55,984 |
| Less: June payment made | ₹1,85,000 |
| September Payment Due | ₹3,70,984 |
Ashok’s surcharge (10% on income between ₹50L and ₹1 crore) adds ₹1.08 lakh to his tax. Many business owners miss the surcharge in their advance tax estimate — and then face a ₹10,000+ shortfall interest at year-end. Always check if your income crosses ₹50 lakh, ₹1 crore, or ₹2 crore surcharge thresholds.
Interest Calculation: What It Costs to Underpay
Missing or underpaying the September advance tax instalment triggers interest under Section 234C of the Income Tax Act, 2025 (formerly Section 234C of the old Act). Here is how to calculate it:
Interest Under Section 234C (for Instalment Shortfall)
Formula: Interest = Shortfall from required cumulative amount × 1% × number of months
For the September instalment: If by 15 September you have paid less than 45% of your annual tax, interest runs at 1% per month on the shortfall — for 3 months (from 15 September to 15 December, when the next instalment is due). If the shortfall is still not covered by December, interest continues.
For the June instalment shortfall carried into September: If you underpaid in June, the shortfall attracted interest from 15 June. If you pay the outstanding in September, interest runs for 3 months (June to September). Each month is counted as a full month — even if you pay on 16 September, that is a full additional month.
| Shortfall Amount | Interest per Month (1%) | 3 Months’ Interest |
| ₹10,000 | ₹100 | ₹300 |
| ₹50,000 | ₹500 | ₹1,500 |
| ₹1,00,000 | ₹1,000 | ₹3,000 |
| ₹3,00,000 | ₹3,000 | ₹9,000 |
| ₹5,00,000 | ₹5,000 | ₹15,000 |
KEY TAKEAWAY
Section 234B vs 234C — know the difference:
Section 234C: Interest for deferment of advance tax — charged when individual instalments fall short of the required percentage. Rate: 1% per month for 3 months per instalment.
Section 234B: Interest for default in payment of advance tax — charged if total advance tax paid by 31 March 2027 is less than 90% of the annual tax liability. Rate: 1% per month from April 1 of the assessment year until the date of assessment or payment.
Most taxpayers who underpay in September incur both — 234C for the quarterly shortfall and 234B at year-end if total payments remain below 90%.
Already Missed the June Instalment? What to Do Before September 15
If you paid nothing in June — or paid less than 15% — the September instalment is your opportunity to correct the position. Here is the practical approach:
If you paid nothing in June:
You need to catch up to the 45% cumulative threshold by September 15. Pay the full 45% in one payment. Interest under Section 234C for the June shortfall has already accrued for 3 months (June 15 to September 15) — this cannot be avoided. But paying the full 45% now stops further interest from the September instalment.
Interest already owed on June shortfall: 15% of annual tax × 1% × 3 months. For a taxpayer with ₹5 lakh annual tax liability, this is ₹5 lakh × 15% × 1% × 3 = ₹2,250. This interest is not paid separately — it is accounted for when the ITR is filed and assessed.
If you paid some but below the 15% threshold in June:
Interest under 234C runs on the portion of the shortfall only. In September, pay enough to reach the 45% cumulative threshold. The June shortfall interest is calculated and added at assessment time — you do not need to pay it separately now.
QUICK TIP
If your income in Q2 (July–September 2026) has been significantly lower than Q1 — due to a slow quarter, a contract ending, or a large expected order that did not materialise — your estimated annual income may have reduced from what you estimated in June. Revise the estimate downward before calculating the September payment. Overpaying advance tax is harmless (it gets refunded with 6% interest after ITR processing) — but revising the estimate accurately avoids locking up cash unnecessarily.
5 Common Advance Tax Mistakes — and How to Avoid Them
1. Estimating only April–September income instead of the full year
Advance tax is based on your estimated total income for FY 2026-27 (April 2026 to March 2027). If you estimate only the first half, you understate your liability — and the December and March instalments become very large, or interest under Section 234B accrues at year-end. Always project the full year’s income, even if the second half is uncertain. Use a conservative but realistic estimate.
2. Forgetting to include capital gains in the estimate
Capital gains from selling shares, mutual funds, or property are part of your taxable income and affect advance tax liability. Many taxpayers who sell assets mid-year forget to include the gains in their advance tax estimate. The result: a significant shortfall discovered only at ITR filing time, with Section 234B interest running from April of the assessment year.
3. Not accounting for surcharge at income above ₹50 lakh
The tax calculation seems correct — until income crosses ₹50 lakh and a 10% surcharge applies. For a taxpayer with ₹55 lakh taxable income under the new regime, the surcharge adds approximately ₹30,000–₹35,000 in additional tax. If the advance tax estimate was made without surcharge, the shortfall attracts full Section 234C interest. Always check if your income crosses the ₹50 lakh, ₹1 crore, or ₹2 crore surcharge thresholds.
4. Using old Act section numbers when paying via portal
From FY 2026-27, advance tax payments are governed by the Income Tax Act, 2025. When paying on the portal, select Tax Year 2026-27 (not Assessment Year 2026-27 — that would apply to FY 2025-26 payments). A payment credited to the wrong tax year does not count as advance tax for the current year and creates a mismatch at assessment.
5. Paying on 16 September instead of 15 September
Interest is calculated in full months. If you pay on 16 September 2026 instead of 15 September, the month of September counts as a complete month for Section 234C purposes. For a taxpayer with a ₹2 lakh shortfall, this one-day delay costs ₹2,000 in additional interest. Mark 13 September as your internal deadline — that gives two working days buffer for portal glitches and bank processing.
CPC INSIGHT
CPC Services calculates advance tax for SME clients and individual business owners across Faridabad and Delhi NCR before each instalment deadline — factoring in full-year income projections, capital gains, surcharge applicability, TDS credits, and regime selection. A typical advance tax review takes one hour and saves far more in interest and ITR correction costs.
→ Talk to CPC Services about advance tax planning | Explore Direct Tax Advisory
