Quick answer
The 3rd instalment of advance tax for FY 2026-27 is due on 15 December 2026. By that date, the cumulative advance tax you have paid must reach 75% of your estimated total tax for the year (after reducing TDS and TCS credits). If you miss it, there is no outright penalty — but interest under Section 425 of the Income-tax Act, 2025 (old Section 234C) gets charged on the shortfall. This article walks through the exact calculation, who must pay, and how to pay online.
The December instalment, explained
Advance tax is the “pay as you earn” system. If your net tax for the year (after TDS) is Rs 10,000 or more, you cannot wait till March and pay everything at once. You pay in four instalments through the year. The schedule sits in Section 408 of the Income-tax Act, 2025 (old Section 211 of the 1961 Act):
| Instalment | Due on or before | Cumulative % of estimated tax |
|---|---|---|
| 1st | 15 June 2026 | 15% |
| 2nd | 15 September 2026 | 45% |
| 3rd | 15 December 2026 | 75% |
| 4th | 15 March 2027 | 100% |
The percentages are cumulative, not per quarter. By 15 December, three-quarters of your full-year estimated liability should already be with the government. December is the quarter where the estimate matters most — nine months of the year are behind you, so your income picture is fairly clear, and a sloppy estimate here is hard to fix later without paying interest.
How to compute your December payment
The computation rule is in Section 405 (old Section 209). The steps:
- Estimate your total income for FY 2026-27 from all sources — salary, business, profession, rent, interest, capital gains, everything. Base it on actuals up to 30 November plus a realistic estimate for December to March. A common mistake: estimating the full year as “9 months ÷ 3”. That underestimates a growing business and overestimates a seasonal one.
- Subtract deductions you will claim (80C-type deductions under the old regime, or nothing under the new regime, etc.).
- Compute tax on that income at the slab rates of the regime you chose.
- Subtract TDS and TCS credits. Here is the trap most people fall into: only reduce your liability by TDS that actually appears in your Form 26AS / AIS. If your deductor has not deposited or reported it, the credit is not yours in practice, and the shortfall will still be tested against you.
- What remains is your net advance-tax liability for the year.
- December target = 75% of that number, minus what you already paid in June and September.
If you file under the presumptive schemes (44AD for business, 44ADA for profession — now Sections 57/58 of the 2025 Act), you skip this entirely: presumptive filers pay 100% once, by 15 March 2027, and instalment interest does not arise for them. We covered that in our 44ADA guide.
Who must pay, and who is exempt
You must pay if: your estimated net tax liability for the year, after TDS, is Rs 10,000 or more (Section 404, old Section 208). That includes freelancers, business owners, investors with capital gains or rental income, and — this is the one people miss — salaried employees who have significant other income. If your employer’s TDS does not cover rent, interest, or freelance income on the side, the balance must come through advance tax.
You are exempt if: you are a resident senior citizen (age 60 or above) with no income from business or profession. No instalments, no advance tax at all. If you are 60+ but do run a business or profession, the exemption does not apply to you.
What happens if you miss the 15 December deadline?
Short version: no penalty, but interest. This is one of the most-asked questions on this topic, so here is the full picture:
- Section 425 (old Section 234C) covers the instalment shortfall. For each of the first three instalments, interest is a flat 3% of the shortfall; for the March instalment it is 1%. One detail worth knowing: the interest is flat — catching up a day late does not reduce it. If you paid 12% or more by 15 June, or 36% or more by 15 September, no interest applies for those quarters (Section 425(2) tolerances).
- Section 424 (old Section 234B) is the year-end check. If your total advance tax for the year ends up below 90% of your assessed tax, interest at 1% per month applies from 1 April of the following year until the shortfall is assessed. Paying self-assessment tax before the intimation goes out stops the clock.
- There is also a carve-out (Section 425(4)): no interest on shortfall that comes from under-estimating capital gains, lottery/race winnings, first-time business income, or dividend income — provided the tax on those is paid in a later instalment or by 31 March.
Interest under 425 is charged in your return. You will see it computed automatically when you file.
How to pay advance tax online (step by step)
- Go to incometax.gov.in and click e-Pay Tax (Quick Links).
- Enter your PAN and mobile number, verify with the OTP.
- Select Income Tax, then proceed.
- Assessment Year: choose AY 2027-28 (the assessment year for FY 2026-27).
- Type of Payment: Advance Tax (100) — this is the critical field.
- Enter the amount and choose your bank/payment mode.
- Preview the challan, confirm the Minor Head 100 (Advance Tax) — a payment keyed under self-assessment tax (Minor Head 300) does not count toward the instalment and is tedious to get corrected.
- Pay and save the challan receipt. You will need the BSR code and challan serial number when you file your ITR.
The challan is ITNS 280, Major Head 0021 (income-tax other than companies), Minor Head 100 (advance tax).
Worked example: computing the December instalment
Say Ramesh, a consultant in Bengaluru, estimates his FY 2026-27 income as follows:
- Total estimated tax liability for the year: Rs 3,00,000
- TDS expected on client payments (all appearing in his 26AS): Rs 90,000
- Net advance-tax liability: 3,00,000 − 90,000 = Rs 2,10,000
- Required cumulative by 15 Dec (75%): 2,10,000 × 75% = Rs 1,57,500
- Paid in June (15%): Rs 31,500; paid in September (cumulative 45%): Rs 94,500
- Due by 15 December: 1,57,500 − 94,500 = Rs 63,000
Now suppose Ramesh paid only Rs 1,20,000 by 15 December. Shortfall = 1,57,500 − 1,20,000 = Rs 37,500. Interest under Section 425 = 3% of 37,500 = Rs 1,125. That is the price of the miss — small here, but it scales with the shortfall, and a larger gap plus the Section 424 year-end check can make December misses expensive.
Want a quick estimate for your own numbers? Try our advance tax calculator and work out your instalments in a minute.
Frequently asked questions
What happens if advance tax is not paid by 15 December?
There is no outright penalty for missing the 15 December deadline. Instead, interest gets charged under Section 425 of the Income-tax Act, 2025 (old Section 234C) — a flat 3% of the shortfall between 75% of your estimated tax and what you actually paid by that date. A separate year-end interest under Section 424 can apply if your total advance tax falls below 90% of your assessed tax. Both get added to your tax bill when you file your return.
Who needs to pay advance tax in December 2026?
Anyone whose estimated net tax liability for FY 2026-27, after TDS and TCS, is Rs 10,000 or more. That covers freelancers, business owners, investors with rental or capital-gains income, and salaried employees whose employer TDS does not cover their side income. Resident senior citizens aged 60 or above with no business or profession income are fully exempt. Presumptive filers (44AD/44ADA) pay only once, by 15 March 2027.
Do salaried employees need to pay advance tax if TDS is already deducted?
Only if the TDS does not cover the full liability. If your employer deducts enough to cover your entire tax bill, no advance tax is due. But if you earn rent, interest, freelance income, or capital gains on top of your salary, that extra tax is not covered by employer TDS — and if the balance crosses Rs 10,000, advance tax instalments become mandatory. You can also ask your employer to deduct extra TDS on your other income to close the gap.
How do I pay advance tax online, and which assessment year should I select?
Pay on incometax.gov.in under e-Pay Tax using Challan ITNS 280 (Major Head 0021, Minor Head 100 — Advance Tax). For the December 2026 instalment, select Assessment Year 2027-28, because it is the tax for FY 2026-27. Double-check the minor head before submitting: payments keyed as self-assessment tax do not count toward your instalments and are tedious to correct.
Do senior citizens need to pay advance tax?
Resident individuals aged 60 or above are exempt from advance tax if they have no income from business or profession. They simply pay their tax when they file their return. Senior citizens who do earn business or professional income are not exempt and must follow the normal instalment schedule.
Is there a penalty for missing the December instalment, or only interest?
Only interest — there is no penalty provision for missing an advance-tax instalment. Section 425 charges flat interest on the instalment shortfall (3% at December), and Section 424 charges 1% per month at year-end if advance tax stays below 90% of assessed tax. Many articles use the word “penalty” loosely; in the Act, it is interest, and it is computed automatically in your ITR.
Official sources
- Income-tax e-filing portal — e-Pay Tax
- CBDT — official tax information
- Form 26AS / AIS — verify your TDS credits
Reviewed by Asuthod Rathod, CA · Last updated: 13 October 2026
Disclaimer: Tax laws change frequently. The information here is for general guidance only — verify on the official income-tax portal or consult a qualified tax professional before relying on it for your own return.
Editorial byline for eircicai freelancer tax and ITR filing guides — covering 44ADA presumptive tax, advance tax, and ITR filing. Content is reviewed by Asuthod Rathod, CA.