The third instalment of advance tax for the financial year 2025–26 was due on December 15, 2025. While many taxpayers paid on time, some missed the deadline. If you are among them, there is no need to panic, but you should be aware of the interest cost involved.
NO DIRECT PENALTY, BUT INTEREST APPLIES
Missing the advance tax deadline does not attract an outright penalty under the Income Tax Act. However, interest is charged for late or short payment.
Tax experts explain that interest is levied under Section 234C of the Income Tax Act, 1961 if the required amount is not paid by the due date.
HOW MUCH INTEREST WILL YOU PAY?
Once the December 15 deadline is missed, simple interest at 1% per month is charged. This interest is calculated for three months on the shortfall in meeting the 75% advance tax requirement that should have been paid by December.
The interest applies only to the unpaid portion, not the entire tax amount.
CAN YOU PAY EVERYTHING LATER?
Yes. If you missed the third instalment, you can still pay the remaining advance tax in one go before the March 15 deadline.
In such cases, the cost is mainly limited to the interest on the delayed December instalment. As long as the total advance tax paid by March meets the required level, no extra interest is charged for missing the December target.
HOW IS ADVANCE TAX INTEREST CALCULATED?
Interest on delayed advance tax is calculated in two parts.
Section 234C looks at each instalment, i.e., of June, September, December and March. It charges 1% simple interest per month on the shortfall, based on how much tax should have been paid by each due date.
Section 234B applies at the end of the financial year. If a taxpayer has paid less than 90% of the total tax liability, interest is charged at 1% per month on the remaining amount. This interest runs from April 1 until the balance tax is fully paid.
WHAT SHOULD TAXPAYERS DO NOW?
If you have missed the December advance tax deadline, it is best to clear the remaining amount before March 15. Doing so can help keep interest costs low.
While there is no penalty, the interest can still add up. Keeping track of advance tax dates and paying on time can help avoid unnecessary costs later.
