Overview
With the Income Tax Act 2025 coming into force from 1 April 2026, taxpayers are preparing for the first Advance Tax instalment due on 15 June 2026. While the advance tax payment schedule and liability thresholds remain largely unchanged from the earlier law, taxpayers must familiarize themselves with the new terminology, section numbers, and compliance requirements introduced under the revamped legislation.
This article explains the advance tax provisions under the new Act, including payment deadlines, interest implications for non-compliance, exemptions available to eligible taxpayers, and special considerations for partners receiving remuneration or interest from partnership firms. It also highlights common errors that taxpayers may make while paying advance tax on the income tax portal, such as selecting the wrong Tax Year or opting for provisions under the old Income Tax Act, 1961.
Through a practical question-and-answer discussion between Arjuna and Krishna, readers will gain clarity on how the "Pay as You Earn" principle continues under the new law and the steps required to ensure accurate tax compliance while avoiding unnecessary interest and penalties.
Arjuna (Fictional Character): Krishna, the government has enacted the new Income Tax Act 2025, which comes into effect from 1st April 2026. Taxpayers are confused about advance tax - has anything changed? Is the first advance tax payment due soon? What are common mistakes to avoid while making payment under the new act?
Krishna (Fictional Character): Arjuna, the due dates and the 4 instalments structure remain the same as per the old Income Tax Act 1961. What has changed is only the renumbering and reorganization of provisions under the new Act. The first instalment of Advance Tax for Tax Year 2026-27 is due on 15th June 2026, by which taxpayers must deposit at least 15% of their estimated total tax liability for the year.
However, while making payment on the portal, taxpayers must avoid making mistakes like selecting "Assessment Year" instead of "Tax Year", Under the new Act, the concept of Assessment Year no longer exists - it is now called Tax Year. Another common mistake that can happen while making payment is selecting the old "Income Tax Act 1961" instead of "Income Tax Act 2025", this will lead to wrong section codes and incorrect challans .
Arjuna (Fictional Character): Krishna, what are the consequences of not paying advance tax on time?
Krishna (Fictional Character): Arjuna, the interest provisions under the new Act carry the same rates but under new section numbers. Under Sections 424 and 425 of the new Income Tax Act 2025 (corresponding to old Sections 234B and 234C of the Income Tax Act 1961):
1) Section 424 (old 234B): If advance tax paid is less than 90% of the assessed tax, interest at 1% per month (simple interest) is levied from 1st April after the end of the Tax Year till the date of actual payment.
2) Section 425 (old 234C): Interest at 1% per month (simple interest) is levied for deferral of instalments - i.e., if instalments paid are less than 15%, 45%, 75%, or 100% at the respective due dates.
Therefore, taxpayers must be extra careful to avoid these interest costs.
Arjuna (Fictional Character): Krishna, what should the partners of partnership firms keep in mind before paying advance tax?
Krishna (Fictional Character): Arjuna, Section 194T introduced under the old Act (w.e.f. 1st April 2025) for TDS on salary, bonus, commission, remuneration and interest paid by a firm to its partners at the rate of 10% (if exceeding ₹20,000) continues under the new Income Tax Act 2025 and is now renumbered under Section 393(1).
This TDS deducted by the firm is creditable against the partner's final tax liability. Therefore, partners must consider TDS already deducted by the firm while estimating their advance tax instalments, thereby avoiding unnecessary over-payment or under-payment
Arjuna (Fictional Character): Krishna, who is exempt from paying Advance Tax under the new Act?
Krishna (Fictional Character): Arjuna, Section 264 of the new Income Tax Act 2025 provides the following exemptions from Advance Tax:
1) Threshold: Persons whose estimated advance tax liability for the Tax Year is less than ₹10,000 are not required to pay advance tax.
2) Senior Citizens: Resident individuals aged 60 years or above who do not have any income from business or profession are completely exempt from payment of advance tax.
3) Presumptive Taxation: Persons who have opted for Presumptive Taxation under the provisions corresponding to old Sections 44AD or 44ADA need to pay their entire tax liability in a single instalment on or before 15th March of the Tax Year, instead of four instalments.
Arjuna (Fictional Character): Krishna, what should taxpayers learn from this?
Krishna (Fictional Character): Arjuna, just as in the Mahabharata — the rules of the battlefield may change, but the discipline of the warrior must not. Similarly, whether it is the old Act or the new Act, the message of Advance Tax remains the same- "Pay as you Earn". What has changed is the numbering, terminology (Tax Year replacing Assessment Year/Previous Year), and the default adoption of the New Tax Regime with revised slab rates. Taxpayers must: (1) re-estimate their income based on new slab rates and the applicable regime; (2) check whether TDS deductions at source reduce their advance tax obligation; and (3) keep a close eye on the new section numbers to ensure accurate compliance. Remember - a small lapse today can lead to interest and penalties tomorrow.
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