Advance Tax under India’s Income-tax Act, 2025: Checklist for TY 2026–27

India’s advance tax framework remains largely unchanged under the Income-tax Act, 2025. Review June 15, 2026 filing deadlines, computation rules, and transition compliance requirements.

India’s Income-tax Act, 2025 substantially retains the existing advance tax framework while introducing limited substantive changes. The revised legislation primarily seeks to simplify the statutory structure, enhance clarity, and reorganize procedural provisions without materially altering the core advance tax regime.

However, the transition to the new law introduces several structural and administrative modifications. Businesses and taxpayers should therefore review the revised compliance structure, terminology, and reporting requirements to ensure accurate tax planning and continued regulatory compliance.

Overview of advance tax under the Income-tax Act, 2025

The Income-tax Act, 2025, does not introduce major policy-level changes to India’s advance tax system. Instead, it has shifted the focus on simplifying the drafting structure and improving the presentation of provisions to make the law easier to interpret and administer.

Under the revised framework, the provisions governing advance tax have been reorganized to separately address advance tax paid voluntarily by taxpayers and advance tax liabilities arising pursuant to directions issued by the Assessing Officer (AO).

The new legislation also removes repetitive or redundant provisions and introduces a more streamlined structure for computing advance tax liability.

For businesses, this means that while the overall compliance process remains familiar, tax and finance teams should still review the revised section references, terminology changes, and reporting framework introduced under the new law.

India’s advance tax calendar for Tax Year 2026–27

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One of the key structural changes introduced under the Income-tax Act, 2025, is the replacement of the “Assessment Year” concept with the “Tax Year” framework.

Despite this terminological shift, the timing and manner of advance tax payment remain unchanged. Taxpayers will continue to pay advance tax during the same financial year in which the income is earned.

Similarly, the quarterly installment schedule continues under the new regime without modification.

Source: Income Tax FAQ – Interplay and Transition

Businesses should therefore continue maintaining quarterly tax estimation, provisioning, and cash flow management systems in line with the existing payment framework. Companies operating across multiple business verticals or jurisdictions may also need to align their ERP and accounting systems with the revised “Tax Year” terminology introduced under the new law.

Threshold applicability

The threshold for payment of advance tax remains unchanged under the Income-tax Act, 2025.

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Under Section 404, taxpayers are required to pay advance tax if the estimated tax liability during the relevant year equals or exceeds INR 10,000 (US$104.50).

The continuation of the existing threshold provides stability and continuity for both businesses and individual taxpayers already operating within established tax compliance systems. It also reduces the need for significant procedural adjustments during the transition to the new legislation.

Computation under Section 405

Section 405 of the Income-tax Act, 2025, simplifies the method for calculating advance tax liability. Taxpayers must compute their estimated total tax liability for the financial year and then reduce applicable tax deducted at source (TDS) or tax collected at source (TCS) credits.

The computation can be summarized as follows:

Advance tax payable = Estimated tax liability – TDS/TCS credits

To determine the payable amount, taxpayers must first estimate their taxable income for the financial year and calculate the corresponding tax liability using the applicable rates. They can then deduct eligible TDS or TCS amounts expected to be available during the year.

The remaining amount constitutes the advance tax liability payable in installments during the financial year.

Example on India’s advance tax computation

For example, if a business estimates its total tax liability at INR 1 million (US$10,450.8) and expects INR 300,000 (US$3,135.2) to be available as TDS credit, the remaining INR 700,000 (US$7,315.5) must be paid through advance tax installments.

The law further clarifies that TDS or TCS credits can only be considered where:

1. The corresponding income has been included while estimating taxable income, and
2. The tax has actually been deducted or collected by the relevant party.

Additionally, certain categories of taxpayers may also need to include net agricultural income while computing advance tax liability where required under the applicable provisions of the Finance Act, 2026.

FAQs on transition between the old and new advance tax regime

Q1. Will the Income-tax Act, 2025, apply to advance tax payments made before April 1, 2026?

No, advance tax payments relating to income earned before April 1, 2026, will continue to be governed by the Income-tax Act, 1961, even if the payment is made during the transition period.

The applicable law is determined based on the financial year to which the income relates.

Accordingly, the advance tax installment due on March 15, 2026, for FY 2025-26 (AY 2026-27) will continue to be governed by the Income-tax Act, 1961. This is because the underlying income pertains to a period before the commencement of the new law.

Q2. If advance tax for FY 2025–26 is short-paid, which law will govern the interest liability?

Interest for short payment or deferment of advance tax relating to FY 2025–26 will continue to be governed by the previous income tax law. This is because both the obligation to pay advance tax and the default in payment arose before the new act came into force.

Accordingly, Section 234B of the Income-tax Act, 1961, applies to defaults in payment of advance tax and Section 234C applies to deferment of advance tax installments.

Q3. From when will advance tax obligations fall under the Income-tax Act, 2025?

Advance tax obligations relating to income earned during FY 2026-27 will be governed under the new law. The first advance tax installment under the Income-tax Act, 2025, therefore, becomes due on June 15, 2026.

CLICK HERE: Income Tax June 2026 Compliance: Form 130 Issuance, TDS Deadlines in India

Q4. Does the transition to the “Tax Year” system change the advance tax payment schedule?

No. Although the Income-tax Act, 2025, replaces the term “AY” with “TY” the advance tax payment schedule remains unchanged.

Taxpayers must continue paying advance tax in quarterly installments during the same financial year in which the income is earned.

Q5. Will taxpayers need to revise their compliance systems after the transition?

The advance tax mechanism remains largely unchanged; however, businesses and taxpayers may still need to update internal tax documentation, ERP and accounting systems, tax reporting terminology, and compliance references to align with the “Tax Year” framework.

Organizations with automated tax reporting systems or multinational reporting structures may particularly benefit from reviewing internal compliance workflows ahead of implementation.

Q6. Are the advance tax thresholds and interest rates changing after the transition?

No. The transition to the new legislation does not change the previously prescribed threshold for advance tax applicability or the interest rates applicable to defaults or deferment in payments.

Q7. Who is required to pay advance tax?

Taxpayers must pay advance tax if their estimated tax liability during the financial year equals or exceeds the prescribed threshold after adjusting applicable TDS or TCS credits.

The advance tax provisions apply to a broad category of taxpayers:

1. Individuals
2. Salaried employees with additional sources of income
3. Freelancers and consultants
4. Partnership firms and limited liability partnership (LLPs)
5. Domestic companies
6. Foreign companies earning taxable income in India.

Salaried individuals may also become liable to pay advance tax where income from sources such as capital gains, rent, interest, dividends, or freelance assignments results in additional tax liability beyond the tax deducted by the employer.

Resident senior citizens aged 60 years or above are exempt from advance tax if they do not earn income from a business or profession.

Q. Has the challan used for advance tax payment changed under the Income-tax Act, 2025?

No. Taxpayers will continue to use Challan No. ITNS 280 for payment of advance tax.

While making the payment through the Income Tax Department’s e-Pay Tax portal or authorized banking channels, taxpayers must select the relevant TY and minor head code 100 – Advance Tax.

(US$1 = INR 95.68)

Managing tax in India is critical for FDI companies to stay compliant with local regulations, GST requirements, and global standards such as IFRS, navigate complex filings, and apply correct tax treatments. A well-structured tax process helps to avoid penalties and stay 100% compliant.

Divyansh Shrivastava

Assistant Manager

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