The most common advance tax mistake isn’t missing the date — it’s calculating each quarter’s payment in isolation instead of as a cumulative running total, which either overpays unnecessarily or quietly underpays without anyone noticing until interest accrues.
Advance tax Q2 is due 15 September, and the cumulative requirement by that date is 45% of your total estimated tax liability for the year — not 45% calculated fresh, but 45% minus whatever you already paid in Q1. One important update for 2026: the September installment falls in FY 2026-27, which is governed by the new Income Tax Act, 2025, not the 1961 Act — the old “Section 234C” label most guides still use is technically outdated for this specific installment.
Not sure your Q1 and Q2 advance tax actually add up correctly? WhatsApp us and we’ll check the running total for you.
Quick Summary — Advance Tax Schedule
| Installment | Due Date | Cumulative % of Total Tax |
| Q1 | 15 June | 15% |
| Q2 | 15 September | 45% |
| Q3 | 15 December | 75% |
| Q4 | 15 March | 100% |
Why “Section 234C” Isn’t Quite Right for FY 2026-27
The Income Tax Act, 2025 came into force on 1 April 2026, replacing the 1961 Act going forward. Income earned on or before 31 March 2026 stays governed by the old Act; income earned from 1 April 2026 onward — which includes everything your September 2026 advance tax installment is based on — falls under the new Act’s renumbered provisions. Under the new Act, Section 424 corresponds to the old Section 234B, and Section 425 corresponds to the old Section 234C. The underlying mechanics haven’t changed — same 1% per month interest, same cumulative percentage schedule — but if you’re citing a section number to a client, an auditor, or in your own filing notes, “234C” is the wrong reference for FY 2026-27 specifically.
The Cumulative Trap
Say your estimated total tax for the year is ₹4,00,000. By 15 June, you should have paid 15% — ₹60,000. By 15 September, the requirement is 45% cumulative, which is ₹1,80,000 total paid so far, not ₹1,80,000 paid in Q2 alone. If you already paid ₹60,000 in Q1, your Q2 payment should be ₹1,20,000 to bring the running total to ₹1,80,000 — not another ₹1,80,000 on top.
This sounds obvious written out, but it’s exactly where errors creep in when each quarter is treated as a fresh, independent calculation rather than a cumulative target.
Why Your Estimate Changes Mid-Year
Advance tax is paid against estimated annual income, and that estimate legitimately shifts as the year progresses — a freelancer who picked up an unexpected large project in July has a different Q2 estimate than they had in Q1, and the calculation should reflect that, not just repeat the original Q1 assumption.
The Interest Cost of Getting This Wrong
Interest for underpayment at each installment date is calculated on the shortfall for that specific quarter — it’s not a single annual penalty, it accrues installment by installment. Even if you eventually pay your full annual tax correctly by March, an underpayment at the September stage still carries interest for that specific shortfall period. For FY 2026-27 specifically, this interest now runs under the new Act’s Section 425, even though the calculation method itself is unchanged from the old Section 234C approach.
A Mid-Year Income Spike Needs a Fresh Calculation, Not a Patch
If your business or professional income genuinely jumps between Q1 and Q2 — a large contract closes, a consulting engagement pays out, a property sells — resist the temptation to just add a rough top-up to whatever Q1’s number was. Recalculate your full-year estimate from scratch using the new information, then work out what cumulative percentage you should be at by 15 September, and pay the difference between that figure and what you’ve already deposited. Treating each installment as an isolated top-up rather than a recalculation of the whole year is one of the more common ways businesses end up technically compliant on paper while still carrying unnecessary interest exposure.
References
- Income Tax Act, 2025 — Section 424 (corresponds to old Section 234B; interest for default in advance tax payment)
- Income Tax Act, 2025 — Section 425 (corresponds to old Section 234C; interest for deferment of installments)
- Income-tax.gov.in transition guidance on Income Tax Act, 1961 vs. Income Tax Act, 2025 applicability by date of income
⚠️ The transition between the two Acts is genuinely new as of FY 2026-27 — confirm current section references and any further CBDT clarifications at incometax.gov.in before citing a specific section number in client-facing documentation.
Frequently Asked Questions
Who actually needs to pay advance tax?
Anyone whose total tax liability for the year, after TDS, exceeds ₹10,000. This catches more people than expected — freelancers, professionals with multiple income sources, and anyone with significant capital gains or rental income beyond what TDS already covers.
What if I overestimate and pay too much in Q2?
Excess advance tax gets adjusted against your final tax liability when you file your return, and any genuine overpayment is refunded — it’s not lost, but it does mean money sitting with the department rather than in your business until refund processing completes.
Does advance tax apply if all my income is salary with TDS already deducted?
Generally no, if TDS on salary already covers your full tax liability — advance tax mainly catches income that isn’t already subject to adequate TDS, like business income, capital gains, or significant interest income.
Does the new Income Tax Act, 2025 change how much advance tax I owe?
No — the percentages (15/45/75/100) and the 1% monthly interest rate are unchanged. Only the section numbers and the Act under which they’re charged have changed for income earned from 1 April 2026 onward.
Can I revise my Q2 payment if my income estimate changes again before Q3?
Yes — each installment is an opportunity to recalibrate based on your latest estimate. You’re not locked into the Q1 assumption for the rest of the year; the whole point of quarterly installments is to let the estimate evolve.
Who Must Pay Advance Tax?
Many taxpayers assume advance tax only applies to businesses. In reality, any taxpayer whose estimated tax liability exceeds ₹10,000 after considering TDS may be required to pay advance tax.
⚠️ Confirm current advance tax thresholds and any notified relief at incometax.gov.in before finalizing your payment — minor procedural details occasionally shift between assessment years.
Last Updated: 22 June 2026
Reviewed By: TaxKitab Direct Tax Team
If your income mix includes business income that also pushes you toward the tax audit threshold, your advance tax estimate and your audit status are worth reviewing together rather than separately — they’re calculated from the same underlying numbers.Call or WhatsApp: +91 7448200422Email: info@taxkitab.comWebsite: taxkitab.comSee our Income Tax Return service, or visit Contact.
