The December instalment is the one that catches people. By mid-December there is enough of the year behind you for an honest estimate — and enough still ahead that most businesses have not made one.
By 15 December 2026, cumulative advance tax paid for tax year 2026-27 must reach 75% of the estimated tax liability for the year, net of TDS and TCS credits. The instalment schedule sits in Section 408 of the Income-tax Act, 2025, and the shortfall interest in Section 425.
Not sure what your 75% figure is? WhatsApp us your numbers to date and we will work out the instalment.
Quick Summary
| Instalment | Due on or before | Cumulative % of estimated tax |
| First | 15 June | 15% |
| Second | 15 September | 45% |
| Third | 15 December | 75% |
| Fourth | 15 March | 100% |
| Provision | Income-tax Act, 2025 | Was, under the 1961 Act |
| Liability for advance tax | 403 | 207 |
| Threshold and conditions | 404 | 208 |
| Computation | 405 | 209 |
| Instalments and due dates | 408 | 211 |
| Interest for default | 424 | 234B |
| Interest for deferment | 425 | 234C |
💡 TaxKitab Tip Do not estimate the full year from nine months divided by three. Work out actual profit to 30 November from the books, then add a separate, specifically estimated figure for December to March — including anything you already know about, such as a year-end bonus, an asset sale, or a large receipt scheduled for Q4. The divide-by-three method underestimates in a growing business and overestimates in a seasonal one, and the interest under Section 425 falls on the shortfall either way.
What Is Different This Year
15 December 2026 is the first December instalment falling under the Income-tax Act, 2025, which took effect from 1 April 2026. The substance of the advance tax provisions carried over largely unchanged — the dates and the cumulative percentages are the same — but the section numbers are not.
This matters in two practical places. Working papers citing Section 211 or 234C now cite the wrong Act. And the terminology changed: the 2025 Act uses tax year in place of the previous year and assessment year pairing, so the period ending 31 March 2027 is tax year 2026-27, with no separate assessment year to quote. The wider set of changes is covered in what changed in the Income Tax Act 2025.
Who Has to Pay
Under Section 404, advance tax is payable where the estimated tax liability for the tax year, after reducing TDS and TCS credits, is ₹10,000 or more.
Two exemptions are worth knowing. Resident senior citizens — aged 60 or above at any time during the tax year — with no business or professional income are not required to pay advance tax; a senior citizen with business income remains liable. Presumptive taxpayers pay the whole amount in a single instalment by 15 March, so the June, September and December dates do not apply.
Everyone else — companies, firms, LLPs, individuals with business income, salaried employees with significant other income, anyone with capital gains — is in the quarterly cycle.
Computing the 75%
Section 405 sets out the computation: tax on estimated total income for the tax year at the rates in force, less TDS and TCS credited or creditable, less any relief or credit available.
The step that goes wrong most often is the TDS deduction. Taxpayers reduce their liability by the TDS they expect for the full year, when what matters is the credit actually appearing against them. Reconcile to the annual information statement before relying on a number — a credit the deductor has not reported does not reduce the instalment in practice, and chasing it is the same exercise described on our TDS return page.
The arithmetic for the December payment is then 75% of estimated tax for the year, less advance tax already paid in June and September.
Pay by challan on the e-filing portal under minor head 100. Check the minor head before submitting — a payment keyed as self-assessment tax does not count toward the instalment and is tedious to correct.
What the Shortfall Costs
Interest under Section 425 is charged on the instalment shortfall: 3% of the shortfall at each of the June, September and December due dates — simple interest at 1% per month for the three months to the next date — and 1% of the shortfall at the March date.
There is relief at the first two dates. Under Section 425(2), no interest arises if at least 12% of the tax is paid by 15 June, or at least 36% by 15 September. There is no equivalent cushion at 15 December; the 75% test applies as stated.
Interest under Section 424, the successor to 234B, is separate: 1% per month where total advance tax paid for the year falls short of 90% of assessed tax. The two can apply together.
Section 408(4) provides relief where the shortfall arises from income that could not reasonably have been estimated earlier — capital gains, lottery and similar winnings, first-year business or professional income, and dividend income — provided the tax on it is paid with the remaining instalments or by 31 March. It is worth checking before paying interest on something that may be covered.
Five Checks Before You Pay
- Books closed to 30 November, with the profit figure agreed rather than estimated.
- Known Q4 items listed separately — bonus, asset sale, large contract receipt, interest accrual.
- TDS and TCS credits reconciled to what is actually reported against you, not what you expect.
- June and September payments confirmed as received and correctly tagged to advance tax.
- Minor head 100 checked on the challan before submission.
Where the instalment depends on which regime you are taxed under, settle that first with the new versus old regime comparison; the return filing timeline sets out what the March instalment ultimately builds toward. Founders who would rather treat advance tax as a cash-flow item than a December scramble will find the planning view in what a virtual CFO does.
Frequently Asked Questions
What if I overpay the December instalment? Nothing is lost. The excess carries into the March instalment and ultimately into the return, where it is refundable. Overpaying is the cheaper error — interest on a shortfall is certain, while a refund is merely delayed.
Can I pay after 15 December and avoid interest? No. Section 425 interest attaches to the shortfall measured at the due date. Paying on 20 December still triggers the 3% charge on what was short on the 15th, though paying promptly limits exposure at the March date.
Does salary TDS cover my advance tax? For a salaried employee with no other income, usually yes — the employer’s deduction under Section 392 is designed to. It stops covering you once there is capital gains, rental income, interest beyond what you declared to the employer, or freelance income.
I sold property in November. Does the December instalment include that gain? Yes. The gain arose before the due date, so it goes into the estimate. The Section 408(4) relief is for income arising later, after an instalment date has passed.
What if my income is lower than I estimated in June and September? Recompute from the books. The December instalment is 75% of the revised estimate less what you have paid, so a lower estimate can mean a small payment or none. Keep the working — that is what answers a later query.
Is the ₹10,000 threshold before or after TDS? After. The test in Section 404 is on estimated tax payable net of TDS and TCS credits.
References
- Income-tax Act, 2025 — Sections 403, 404, 405, 408 (including sub-section (4) relief), 424 and 425, and Section 392 on deduction of tax on salary
- The Income-tax Act, 2025 took effect from 1 April 2026; the predecessor provisions are the 207 to 211 and 234B to 234C series of the 1961 Act
- Challan payment under minor head 100 on the income tax e-filing portal
⚠️ Section numbering under the Income-tax Act, 2025 is new and secondary sources are not yet uniform. Confirm section references against the Act text on incometax.gov.in or with your advisor before citing them in a filing or working paper.
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