Advance Tax 2026-27: 15 December Instalment and Interest Guide

Last reviewed: 16 October 2026. Next milestone: the third instalment, 75% of the tax due on your returned income, falls on Tuesday, 15 December 2026. This is the working guide we use with clients before the December instalment: what the Income-tax Act, 2025 actually requires, where the 12% and 36% relief stops, how sections 424 and 425 interest is built, and what to do in the eight weeks between now and the due date.

What changes on 15 December

Advance tax is the income tax you pay during the year, as you earn, rather than in one lump at the time of filing. For FY 2026-27, which the Income-tax Act, 2025 calls Tax Year 2026-27, the liability to pay sits in sections 403 and 404 and the instalment schedule in section 408. The interest provisions that bite when you fall short are sections 424 and 425, which correspond to the old sections 234B and 234C. If you already work from our shorter note on advance tax due dates and 234B/234C, this guide is the detailed version, built around the December date.

By 15 December 2026 your cumulative payment must reach 75% of the tax due on the income you will return. If you paid 15% in June and 45% in September, you owe the final 30 percentage points of that estimate now. The reason December deserves its own guide is simple: it is the first instalment with no cushion. In June and September the Act ignores a shortfall as long as you have paid 12% and 36% respectively. In December the test is the full 75%, and the interest charge for missing it runs for three months at 1% per month, whatever date in the quarter you actually pay later.

The financial year also has a second tax clock running quietly behind it. A business that has a weak first half and a strong festive quarter, or an investor who realised gains in November, often finds that the September estimate is stale by December. The remedy is not complicated, but it needs a fresh estimate, which is the subject of the fourth section below.

Who must pay, and who need not

The threshold is in section 404: if the tax payable for the year, after TDS, TCS and reliefs, is Rs 10,000 or more, advance tax applies. The department's own advance-tax FAQs apply the same Rs 10,000 threshold to individuals, firms and companies, so a company with modest profits is not exempt merely because it is small.

Advance tax for FY 2025-26 (assessment year 2026-27), paid between June 2025 and March 2026, remains under the Income-tax Act, 1961. Only the current year's instalments follow the new section numbers used here.

The instalment schedule and the interest tests

Section 408(1) fixes four dates. Section 425 then tests each date separately, and section 424 tests the year as a whole. The table below puts the two side by side because the relief and the interest period differ at every row.

Three details in this table cause most of the errors we correct. First, once the 12% or 36% floor is missed, interest runs on the shortfall measured against 15% or 45%, not against the floor. Second, the rate is simple interest at 1% for each month or part of a month. Third, the base is the tax due on the income you actually return, reduced by TDS and TCS and by foreign tax relief and certain credits, which is the definition in section 425(5). That is why an estimate made in June can look comfortable and still leave you short once the return is prepared.

Section 424: the year-end 90% test

Section 424 (old 234B) is separate. If you were liable to pay advance tax and paid none, or if the advance tax you paid by 31 March is less than 90% of the assessed tax, interest runs at 1% per month or part of a month on the shortfall, from 1 April following the tax year until the tax is paid or the assessment is made. If you pay self-assessment tax under section 266 when filing, the interest is computed in two periods around that payment date. A payment made on or before 31 March counts as advance tax for the year (section 408(3)), which is why a late December payment still has value even when it is late.

Section 423 and the return

Section 423 (old 234A) is a different animal. It charges interest for delay in filing the return and runs from the due date to the date of filing. Advance tax planning does not remove it, but a paid-up position at filing time keeps it small.

One last mechanical point: if a due date falls on a bank holiday, the department's FAQ allows payment on the next working day without interest. This is not engaged on 15 December 2026, a Tuesday, or on 15 March 2027, a Monday.

How to estimate the tax due

An estimate is not a return, and the Act does not require you to file anything with the department when you revise it. The department's FAQs say a revised estimate needs no form, and that you may adjust the remaining instalments after the first or second. What matters is the number you pay by each date. The method we follow with clients is short.

1. Take the year-to-date books to 30 November and project December to March on a realistic basis, not the optimistic case.
2. Add the income that sits outside the books: interest, rent, dividend, capital gains realised or expected, and any foreign income.
3. Compute the tax under the regime you will actually choose when filing. For individuals, compare both regimes once, in November, and not at filing time.
4. Reduce by tax actually deducted or collected so far, as it appears in your tax credit statement, and by TDS you can reasonably expect before 31 March.
5. Multiply the balance by 75%, subtract what you have paid so far, and that is the 15 December payment.

Our advance tax calculator for FY 2026-27 does steps three to five for you, including the rebate and surcharge. For the wider year-end picture of deductions and regime choice, see the tax saving plan for Tax Year 2026-27. Treat any estimate as a working figure and keep the workings in a file; if a notice or an interest query comes later, the workings are your explanation.

One rule from the department's FAQs deserves repeating: TDS that the payer should have deducted but did not cannot be counted as a credit. If a client has credited you a fee without deducting tax, do not subtract a notional TDS in your estimate. Only tax actually deducted and reflected in your records reduces the figure.

Worked example 1: a business owner, three missed targets

Meera runs a trading firm as a proprietor. Her tax due on returned income for the year turns out to be Rs 4,00,000 after TDS (all figures are illustrative, with no TDS or reliefs). Her instalment history is below.

Meera's section 425 interest is Rs 3,600 in total. Note what the table shows. The June position was rescued by the 12% floor. The September shortfall stays charged for its full three months even though she caught up by March. The December shortfall is the avoidable one: had she paid a further Rs 60,000 before 15 December, the interest line for that row would have been nil. If she also pays all of the Rs 4,00,000 by 31 March, section 424 is not triggered, because advance tax paid is not below 90% of the assessed tax.

Worked example 2: a capital gain in November

Arjun, a consultant, expects regular tax of Rs 1,50,000 for the year and has paid on schedule (Rs 22,500 by June, Rs 67,500 cumulative by September). On 20 November he sells listed shares and the tax on the gain works out to Rs 90,000 (illustrative; the actual rate depends on the asset, holding period and the gain). His total tax for the year is now Rs 2,40,000.

The December test is 75% of Rs 2,40,000, which is Rs 1,80,000. His regular payment to 15 December would be Rs 1,12,500 (75% of Rs 1,50,000), so the gap is Rs 67,500. Section 425(4) protects him: a shortfall caused by failing to estimate capital gains is ignored, provided the tax on that income is paid in the remaining instalments after it arises. The department's FAQ reads this as paying the tax on the gain by the next instalment date, which here is 15 December, or by 31 March if no instalment remains.

Had the sale been on 20 December instead, the next instalment would be 15 March, and the tax on the gain should be paid by then. The practical lesson is to compute the tax on every gain on the day it is realised, park the amount, and pay it with the next instalment. For capital gains on property, the 12.5% versus 20% with indexation comparison is the starting point for the number.

Worked example 3: presumptive professional

Neha is an architect declaring profits under section 58(2) in the presumptive scheme (the Table Sl. No. 1 or 3 category). Her tax for the year is Rs 60,000. Under section 408(2) she may pay the whole advance tax on or before 15 March, and she does not owe anything on 15 December.

She pays Rs 40,000 by 15 March 2027 and the remaining Rs 20,000 as self-assessment tax on 25 July 2027, before filing her return. Two interest charges follow. Under section 425(3) the shortfall of Rs 20,000 at 15 March carries simple interest of 1% for one month, which is Rs 200. Because her advance tax of Rs 40,000 is below 90% of Rs 60,000 (Rs 54,000), section 424 also applies on Rs 20,000 from 1 April to 25 July, which is four months or part-months, so Rs 800. The total is Rs 1,000. A presumptive assessee who pays Rs 54,000 or more by 31 March avoids section 424 altogether, and one who pays the full amount by 15 March avoids both.

Special incomes that get relief

Section 425(4) ignores a shortfall caused by under-estimating or not estimating four kinds of income, provided the tax on them is paid by the next instalment date after they arise, or by 31 March if no instalment is left:

• capital gains;
• winnings from lotteries, gambling, betting and similar sources;
• business or professional income arising for the first time; and
• dividend income.

The relief is narrower than people assume. It does not cover the estimate of your regular income, and it applies only when the shortfall was caused by the special income. It also requires the specific tax on that income to be paid on time, not merely the overall tax. Build the habit of treating each such event as a trigger for a fresh calculation. We cover the TDS treatment of winnings and other special items in the TDS rate finder for FY 2026-27.

NRIs, firms and companies

An NRI with rent, interest, dividends or capital gains from India is subject to TDS under section 195 and the related provisions at the source rates. The advance tax question is whether the tax after that TDS is Rs 10,000 or more. Typical cases are an NRO deposit holder whose bank deducted at the standard rate while the correct DTAA rate is lower, which produces a refund and no advance tax, or an NRI who sold property with a lower-deduction certificate that left the final tax short. In those cases the capital gains relief in section 425(4) works the same way: pay the residual by the next instalment date. Our NRI ITR filing checklist covers how to reconcile TDS credits with the return.

Firms and LLPs follow the four-instalment schedule, and so do companies. Partners' remuneration and interest are firm-level deductions, but the partners' own advance tax depends on their personal income. Companies should confirm in November which tax regime they will apply for the year, because that assumption changes the estimate materially. The December instalment is where we usually revisit those assumptions with the finance team.

How to pay and how to confirm

Advance tax is paid online through the e-Pay Tax service on the income-tax portal, or through authorised bank channels. According to the department's FAQs, the challan should show the assessee's PAN, the type of payment (advance tax), the tax year and the amount. Payment can be made from another person's bank account, but the PAN on the challan must be the assessee's. You need not enter tax, surcharge and cess separately; the total can be entered in the income-tax column and split when the return is filed.

Payments usually appear in your tax credit statement within three to four working days. Do not pay at 11:50 pm on 15 December and assume success; pay by 12 December where you can, and download the challan receipt. Where the Assessing Officer's estimate of advance tax is higher than yours, the department's FAQs say you must intimate your own estimate on Form 152 under Rule 223 of the Income-tax Rules, 2026, failing which you may be treated as an assessee in default. For most clients this never arises, but it is worth knowing if a notice from the department says so.

Common mistakes we see

• Using last year's tax as this year's estimate. A change of regime, a new business line or a bonus changes the number.
• Counting the 12% and 36% relief as a December relief. It stops at September.
• Forgetting the second tax clock on gains. The gain arises on the trade date, not when the funds settle or when the broker's statement arrives.
• Netting off TDS that was not deducted. Only deducted tax is a credit.
• Paying advance tax under the wrong PAN or the wrong year. A challan for the wrong tax year needs a formal correction request.
• Paying all in March and assuming it is equivalent. It avoids section 424 but not section 425, which tests each instalment.
• Ignoring section 424 because the instalments looked right. A large late-year gain with no payment before 31 March can fail the 90% test.
• Not keeping working papers. When a rectification or an interest query arrives, the estimate file is the only proof of how the numbers were reached.

Pre-15 December checklist

The other statutory dates through the year are in our FY 2026-27 compliance calendar, and the structural background to the new Act is in the Income-tax Act, 2025 complete guide.

Frequently asked questions

Sources: Income-tax Act, 2025 (sections 403 to 408, 423 to 425) as published on incometaxindia.gov.in, and the department's FAQs on advance tax and on interest under sections 423 to 426. Figures in the worked examples are illustrative. This article is for general guidance only and is not a substitute for advice on your specific facts and the latest law. Please consult before acting.