Income Tax — Understanding Advance Tax & Self-Assessment Tax (Complete Guide)
- PRAVEEN DILLIBABU
- Dec 3
- 3 min read
By Revenue Dynamics Tax Advisory
Published: 28 November 2025
Category: Income Tax/Compliance
1. Executive Summary
Every taxpayer — especially business owners, professionals, and freelancers — must understand two important concepts under the Income Tax Act: Advance Tax and Self-Assessment Tax.
Both are mandatory. Both have deadlines. And both help you avoid heavy interest under Sections 234B and 234C.
This RDTA guide explains the difference, who is responsible for paying, how to calculate, deadlines, penalties, and expert tips to stay tax-ready.
2. What is Advance Tax?
Advance Tax is also known as the “Pay-as-you-earn tax” system.
Instead of paying your entire income tax at the end of the year, you pay it in advance, in four installments, based on your estimated annual income.
Who should pay?
Anyone whose tax liability exceeds ₹10,000 in a financial year must pay advance tax.
This includes:
✔ Salaried individuals with additional income
✔ Business owners
✔ Freelancers
✔ Professionals
✔ Traders
✔ Rent income earners
✔ Capital gains earners
3. Who Is Exempt from Advance Tax?
Only ONE category is exempt:
✔ Senior Citizens (Age 60+)
who do NOT have business income.
Everyone else must pay advance tax.
4. Advance Tax Installment Schedule
Installment | Due Date | Percentage of Total Tax |
1st | 15 June | 15% |
2nd | 15 September | 45% (cumulative) |
3rd | 15 December | 75% (cumulative) |
4th | 15 March | 100% |
Note: Presumptive taxpayers under 44AD/44ADA pay the entire tax (100%) by 15 March only — no quarterly installments.
5. How to Calculate Advance Tax
Step 1 — Estimate Your Total Income
Salary + business income + rent + interest + capital gains etc.
Step 2 — Deduct Eligible Deductions
80C, 80D, 80G, HRA, housing loan interest, etc.
Step 3 — Calculate Total Tax Payable
Use the applicable tax slab.
Step 4 — Subtract TDS Already Deducted
Step 5 — If remaining tax > ₹10,000 → Pay Advance Tax
In the correct installment proportion.
⭐ Example
A business owner expects an income tax of ₹1,00,000 this year.
Advance Tax calculation:
15 June → ₹15,000
15 Sept → ₹45,000 total
15 Dec → ₹75,000 total
15 March → ₹1,00,000
If he misses an installment → interest applies.
6. What is Self-Assessment Tax?
Even after paying:
✔ TDS
✔ TCS
✔ Advance Tax
You may still have some remaining tax to pay.
This final tax paid after calculating your exact income at year-end is called:
⭐ Self-Assessment Tax (SAT)
Paid before filing your ITR.
7. When Do You Pay Self-Assessment Tax?
You pay it when:
✔ TDS is insufficient
✔ Advance tax wasn’t paid correctly
✔ Additional income arises later
✔ Capital gains happen suddenly
✔ Business profit is higher/salary changes
✔ Mistake in estimating income
Self-Assessment Tax ensures your ITR is fully tax-paid before submission.
8. Penalties for Late Payment
Section 234B — Interest for Non-Payment of Advance Tax
If you pay less than 90% of your total tax before 31 March →
Interest @ 1% per month.
Section 234C — Interest for Missing Installments
If you skip/delay the quarterly dates →
Interest @ 1% per month on the shortfall.
Section 234A — Late Filing of ITR
If Self-Assessment tax is unpaid while filing the return →
You cannot file ITR without full payment.
9. RDTA Expert Tips
💡 Pay the 3rd installment (Dec 15) carefully.
Most taxpayers pay less here and face penalties.
💡 Include capital gains & FD interest
While estimating. Clients forget this → penalty hits.
💡 Presumptive scheme users should pay 100% by March 15.
💡 Salaried individuals with rental income must check Form 26AS & AIS.
💡 Always review your books with RDTA before each due date.
10. FAQs
Q1. Is Advance Tax only for business owners?
No — applies to anyone with a tax liability over ₹10,000.
Q2. Can I revise my Advance Tax calculation?
Yes — pay extra in the next installment.
Q3. Is Self-Assessment Tax compulsory?
Yes — must be paid before filing ITR.
Q4. Can I pay the Advance Tax in a single payment?
Yes — before 15 March without penalty.
Q5. How do I pay?
Visit: https://eportal.incometax.gov.in/iec/foservices/#/e-pay-tax-prelogin/user-details
11. Conclusion
Understanding Advance Tax and Self-Assessment Tax helps every taxpayer avoid interest, penalties, and last-minute stress.
Both taxes ensure smoother compliance and healthier cash flow for individuals and businesses.
RDTA ensures your tax planning is accurate, penalty-free, and fully compliant.
12. Work with RDTA
Stay Tax-Ready with RDTA
Let us handle:
✔ Advance Tax calculation
✔ Self-Assessment Tax planning
✔ Quarterly tax reviews
✔ Income Tax filing
✔ Business compliance
📞 9710675224
Focus on business. We’ll take care of your taxes.
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