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| TL;DR Summary: |
| Companies pay advance tax in four installments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15. You must pay advance tax if your tax liability after TDS exceeds ₹10,000 in a financial year. Estimate your annual income, apply the tax rate, deduct TDS and TCS, and calculate the installment amounts. Section 234B charges 1% monthly interest if you pay less than 90% of your total tax liability as advance tax. Section 234C charges 1% monthly interest if you delay or short-pay any installment. The tax department allows a small tolerance for the first two installments. You can revise your advance tax estimate mid-year if your income changes. Revise by September 15 to catch income deviations early. Paying extra early is allowed and often safer than paying too little. Keep a written record of how you estimated your income to protect against penalties. Monthly income monitoring helps you avoid last-minute surprises. Estimate on the higher side if your income is uncertain. Professional advice helps you avoid interest and optimize your tax payments. |
Most companies in India are required to pay its advance tax instalment in four parts through the financial year, based on income it expects to earn. When you skip an instalment or underpay one, the shortfall attracts interest from the very next day.
This guide explains the advance tax schedule, payment requirements, income estimates for the first two installments, Sections 234B and 234C interest, mid-year revisions, and how we at PKC help companies plan and pay accurately.
Advance Tax Instalment Schedule for Companies (15% → 45% → 75% → 100%)
If your company’s estimated tax liability for the year is Rs 10,000 or more, you don’t pay it as one lump sum after year-end. You pay it in four installments, spread across the financial year, on a cumulative percentage basis.
Here’s what that means for Tax Year 2026-27 (FY 2026-27):
| Instalment | Due Date | Cumulative Tax Payable |
| 1st | On or before 15 June 2026 | 15% of estimated tax liability |
| 2nd | On or before 15 September 2026 | 45% of estimated tax liability |
| 3rd | On or before 15 December 2026 | 75% of estimated tax liability |
| 4th | On or before 15 March 2027 | 100% of estimated tax liability |
These due dates and percentages are carried forward unchanged under the Income-tax Act, 2025, which replaced the Income-tax Act, 1961, from 1 April 2026. The governing provisions now sit under Sections 403 to 408 of the new Act, but the schedule itself hasn’t moved.
The percentages are cumulative.
By September 15, your total payments must reach at least 45% of your estimated annual tax. By December 15, at least 75%. The March 15 payment clears the remaining balance.
For companies, the due dates are fixed. There is no flexibility in timing. If a due date falls on a holiday, you can pay on the next working day, but do not rely on this. Pay before the due date to avoid any dispute. If you’re paying advance tax for the first time, our step-by-step procedure to pay advance tax walks through the actual payment process on the income tax portal.
Now this is different from individuals and firms under presumptive taxation (Section 44AD or 44ADA), who can pay 100% of their liability in a single instalment by 15 March.
Remember: The “advance tax” you pay is your estimated tax for the current financial year after deducting TDS, TCS, and any tax credits. You are paying tax on income you expect to earn in the current year.
If you pay more than the minimum required in an earlier instalment, you reduce the amount due in subsequent instalments. The law requires you to pay at least the specified percentage by each due date. Paying more early is allowed and often prudent.
Who Is Liable to Pay Advance Tax
Any company, private limited, public limited, a foreign company with a permanent establishment in India, or a Section 8 company with taxable income, must pay advance tax if its estimated net tax liability for the year is Rs 10,000 or more, after adjusting for TDS and TCS credit.
Almost every functioning company falls within advance tax obligations, since Rs 10,000 in tax corresponds to a fairly modest level of taxable income.
Newly incorporated companies don’t get a grace period. If their projected tax liability exceeds ₹10,000, they must pay advance tax in the remaining installments for that financial year.
The liability is determined by estimating your total income for the year from all sources, applying the applicable tax rates, and then deducting:
- Tax deducted at source (TDS)
- Tax collected at source (TCS)
- Relief under sections 89, 90, 90A, or 91
- MAT/AMT credit
- Any other tax credit available
If the balance tax payable exceeds ₹10,000, you must pay advance tax.
Foreign companies earning income in India through a branch, project office, or permanent establishment are equally liable, provided their Indian tax liability exceeds the threshold. The advance tax obligation attaches to the income taxable in India, not global income.
Loss-making companies, or those expecting little or no taxable income, may not have an advance tax liability. However, this should be reassessed each quarter as income projections can change.
Important: If your income is uncertain, for example, you have seasonal business or you are awaiting a large contract, you still must estimate and pay. The law allows you to revise your estimate during the year. But you cannot skip installments because your income is uncertain.
How to Estimate Current-Year Income for the First Two Instalments
The hardest part of advance tax compliance for companies is estimating income for the first two installments because the financial year has just started.
You have limited actual data for June 15 and only a few months of data for September 15. Yet you’re expected to estimate a full year’s income accurately enough to avoid interest.
The law acknowledges this difficulty and provides some tolerance.
- The Income Tax Act provides that if the advance tax paid in the first instalment is less than 12% of the tax due on returned income, interest under Section 234C may apply.
- Similarly, for the second instalment, if the total paid by September 15 is less than 36% of the tax due on returned income, interest may apply.
This means you have a small margin of error. You need to pay 15% by June 15, but if your estimate is off and you actually owe more, you will not attract interest under Section 234C as long as you have paid at least 12% of the actual tax due. The same applies to the 36% tolerance for the second instalment.
Here is how to estimate for the first two instalments:
Step 1: Project annual income
Take your previous year’s taxable income as a base, then factor in changes you already know about: a new client contract, a plant expansion, a cost increase, or a business line you’ve exited. This gives you a reasonable starting estimate even before current-year data exists.
Step 2: Use a run-rate method
By June, you likely have April and May numbers, even if unaudited. Annualise this run rate, adjusting for seasonality if your business isn’t evenly spread across the year.
A company with heavy Q4 sales, for example, shouldn’t simply multiply Q1 numbers by four.
Step 3: Build in known one-off items separately
If you expect a capital asset sale, a large one-time expense, or an insurance claim settlement during the year, add or subtract it from your run-rate estimate rather than let it distort your recurring income base.
Step 4: Compare normal tax versus MAT
For companies subject to Section 115JB, calculate both figures for your estimate and use the higher one.
If you get this comparison wrong at the estimation stage, you may end up short on your first two instalments.
Step 5: Factor in expected TDS and TCS credit
Your advance tax liability is calculated net of tax already deducted or collected at source.
If a significant portion of your income is subject to TDS, your actual advance tax cash outflow will be lower than your gross estimated tax.
Step 6: Use management information system, not just accounting data
Your MIS reports, sales pipeline, and budget variance reports typically give you a more current picture than statutory books, which lag by weeks.
For the June and September instalments especially, lean on internal reporting rather than waiting for finalised accounts.
Step 7: Revisit and refine
Treat each of the four installments as a checkpoint. Your March estimate should be far more accurate than your June one, simply because you have three quarters of real data behind you by then.
Build a quarterly review into your compliance calendar rather than estimating once in April and forgetting about it.
Remember, a small shortfall in the first instalment has little impact. The key is to catch up by September and stay on track through December and March, as most interest arises from large, uncorrected shortfalls carried to year-end.
For the second instalment, you have the benefit of three months of actual data. You can refine your estimate based on actual income from April to August. Use this data to revise your annual projection.
Tip: Keep records of how you estimated your tax. If questioned, you should be able to show it was based on reasonable assumptions. Good documentation can help protect you from penalties under Section 273 for an untrue estimate.
Interest Under Section 234B for Shortfall in Advance Tax
Section 234B is triggered when you have not paid at least 90% of your total tax liability as advance tax.
If that happens, you owe interest at 1% simple interest per month, or part of a month, calculated from 1 April following the financial year until the date you actually pay the balance. Even one day into a new month counts as a full month for this calculation.
Example: For your company
- Assessed tax: ₹50,00,000
- Advance tax + TDS paid: ₹40,00,000 (80%)
- Balance tax: ₹10,00,000
Because only 80% of the assessed tax was paid (below the 90% threshold), Section 234B applies.
Interest under Section 234B: The shortfall for interest purposes is the difference between your assessed tax and what you’d already paid: which is ₹10,00,000.
If the ₹10,00,000 balance is paid in July (4 months after the financial year-end):
₹10,00,000 × 1% × 4 months = ₹40,000
Important: Notice this interest keeps running until you actually pay. If your return is ready in July but you delay the payment itself, interest continues to accrue for those extra days. The longer you delay, the more interest you pay.
For Tax Year 2026-27 onward, this provision is under Section 424 of the Income-tax Act, 2025, which carries forward the same 90% threshold and 1% monthly rate that applied under the erstwhile Section 234B of the 1961 Act.
Even if you’ve technically met each quarterly instalment percentage along the way, if your final assessed tax turns out higher than expected, due to a late-discovered income item, a disallowed expense, or a MAT adjustment, and your total payments fall below 90% of that final figure, this interest still applies.
NOTE:
A large payment in March can help avoid Section 234B by ensuring at least 90% of the tax is paid by March 15. However, it does not avoid Section 234C, which is based on whether each instalment was paid on time.
To avoid Section 234B, aim to pay at least 90% of your estimated tax by March 15. If your estimate is too low, you may miss the threshold, so it is generally safer to estimate conservatively and revise it upward during the year if needed.
Interest Under Section 234C for Deferred Instalments
Section 234C deals with the timing of each advance tax instalment.
Even if you pay 100% of your tax by March 15, you may still attract interest under Section 234C if you delayed payments in earlier installments.
The interest rate is the same 1% per month, but the period differs by instalment. For the first three installments, interest runs for three months. For the fourth and final instalment, it runs for one month only.
Here’s the standard shortfall pattern for companies:
| Instalment Due | Required Cumulative % | Interest Period if Shortfall |
| 15 June | 15% | 3 months |
| 15 September | 45% | 3 months |
| 15 December | 75% | 3 months |
| 15 March | 100% | 1 month |
Example: For a Company
- Final tax liability: ₹20,00,000
- Required by 15 September (45%): ₹9,00,000
- Actually paid: ₹6,00,000
- Shortfall: ₹3,00,000
Interest under Section 234C is calculated separately for each instalment that has a shortfall.
₹3,00,000 × 1% × 3 months = ₹9,000
Section 234C interest is calculated on each shortfall separately. Unlike Section 234B, which looks at the total shortfall, Section 234C looks at each instalment’s compliance
Under the Income-tax Act, 2025, this provision moves to Section 425, replacing the earlier Section 234C of the 1961 Act.
The new Act provides a buffer for the first two instalments: no Section 425 interest applies if you pay at least 12% by 15 June or 36% by 15 September, even though the formal targets are 15% and 45%. This helps companies manage early estimates with more flexibility.
Exceptions:
Certain types of income also get relief from Section 234C/425 interest if they genuinely couldn’t have been foreseen when you made your earlier estimates. This includes capital gains, casual income, and dividend income (other than deemed dividend) fall in this category.
If such income arises later in the year, you avoid interest on the portion related to it, provided you pay the tax on it in the instalments that fall due after it arises, or by 31 March if it arises after your last instalment date.
This exception does not cover business income shortfalls. If you underestimated your business income, you cannot claim this exception. You must pay interest under Section 234C.
Revising Your Estimate Mid-Year Without a Penalty
The Income Tax Act allows you to revise your advance tax estimate during the financial year. There is no penalty for revising your estimate, provided the revision is made in good faith and based on reasonable grounds.
Section 212 allows you to revise your advance tax estimate during the year.
- If income increases, revise the estimate upward and pay the additional tax through remaining installments.
- If income decreases, revise the estimate downward. Any excess tax already paid will be adjusted when you file your return.
Do not treat your original estimate as fixed if your income is clearly rising.
If your actual profits exceed projections and you fail to revise your installments, you may face Section 234C interest on the shortfall installments.
You are expected to update your estimate as circumstances change.
Actionable Tips:
- Review before each instalment: Pull updated management accounts, compare actual performance with your original full-year projection, and adjust the upcoming payment based on the revised estimate.
- Keep an internal record: Document the comparison and adjustments. It shows a good-faith estimation process if reviewed and prevents a routine “pay the same as last quarter” approach.
- Fix underestimates early: If you underpaid earlier instalments, you generally cannot reverse the Section 234C interest already triggered. Adjusting later instalments only prevents further shortfalls.
- Start monitoring by September at the latest: Catching an underestimation early gives you more room to correct payments before year-end.
- Build in a buffer: If income is uncertain, estimate slightly higher to reduce Section 234C interest risk. Any excess payment can be claimed as a refund when filing the return.
- Track income monthly: Do not wait for quarterly reviews. Early visibility into deviations helps you plan the next installment more accurately.
PKC’s Advance Tax Planning & Estimation Support
PKC Management Consulting provides comprehensive advance tax planning and estimation support for companies across India.
Backed by over 35 years of experience, we offer tax advisory, compliance, and planning services to businesses of all sizes, including MNCs, private limited companies, LLPs, partnership firms, foreign subsidiaries, and more. This advanced tax support sits within PKC’s broader corporate tax planning services, which cover tax compliance, optimization, dispute support, and transfer pricing for companies of all sizes.
PKC’s team of tax professionals help companies with:
- Advance tax projections: PKC’s tax planners prepare detailed projections of your annual tax liability based on your business plan, order book, and historical data. These projections are used to calculate the exact amount due for each installment.
- Cash flow management: Advance tax payments impact your cash flow. PKC helps you plan your payments to minimise the impact on working capital while ensuring full compliance.
- Revision support: If your income changes during the year, we assist in revising your estimate and adjusting subsequent instalments. This ensures you do not overpay or underpay.
- Interest optimisation: PKC analyses your payment schedule to minimise interest under Sections 234B and 234C. By paying the right amount at the right time, you avoid unnecessary interest costs.
- Compliance support: PKC handles the entire compliance process from calculation to payment to documentation. This includes preparing challans, tracking due dates, and maintaining records for future reference.
- Tax structure optimisation: PKC helps design tax-efficient structures that reduce your overall tax liability. This includes advice on tax regimes, deductions, and exemptions that affect your advance tax calculations.
For foreign companies operating in India, we also offer specialised support on DTAA advisory, transfer pricing, and cross-border tax issues that impact advance tax calculations.
At PKC Management Consulting, we take a proactive approach. Instead of reacting to due dates, we work with you throughout the year to monitor income, track changes, and adjust estimates. This reduces the risk of last-minute surprises and interest penalties.
If you are unsure about your advance tax liability or want to optimize your payments, PKC can provide the guidance you need.
Our services are moulded to your specific business needs, ensuring that you pay the right amount at the right time, no more, no less.
FAQs
Q1: What are the advance tax instalment due dates for companies?
Companies pay advance tax in four installments: 15% by 15 June, 45% cumulative by 15 September, 75% cumulative by 15 December, and 100% by 15 March. These percentages are cumulative, not additional amounts at each date. This schedule applies to all companies regardless of size or turnover, with no single-instalment option available.
Q2: What happens if I underpay the June installment?
You’ll owe interest under Section 234C (Section 425 under the Income-tax Act, 2025) at 1% per month for three months on the shortfall amount. However, if you’ve paid at least 12% of your tax liability by 15 June, no interest applies for that installment. You should still correct the shortfall by paying more at your September installment.
Q3: How is Section 234B interest different from Section 234C?
Section 234B (now Section 424) applies once, at year-end, if your total advance tax paid is less than 90% of your final assessed tax. Section 234C (now Section 425) applies separately to each of the four instalments if you miss the required cumulative percentage on that specific due date, even if you eventually pay your full liability by March.
Q4: Can advance tax estimates be revised during the year?
Yes. There’s no formal revision process or form. You simply adjust the amount you pay at each subsequent installment based on your updated income projection. Revising protects you from further interest going forward, but it doesn’t remove interest already triggered by a shortfall at an earlier instalment date.
Q5: Is advance tax applicable to newly incorporated companies?
Yes. There’s no exemption or grace period for new companies. If your estimated tax liability for the year, even a partial first year, is Rs 10,000 or more, you’re required to pay advance tax in installments from your very first year of operation.
Q6: What is the minimum tax liability threshold for advance tax to apply?
Advance tax applies if your company’s estimated net tax liability for the year, after adjusting for TDS and TCS credit, is Rs 10,000 or more. This threshold is the same across companies, individuals, and other assesses. There’s no separate, higher threshold specifically for companies.
