Introduction
The introduction of the Income-tax Act, 2025 brings structural clarity and simplification across various provisions, including advance tax. While there are no major policy changes in the concept or applicability of advance tax, the provisions have been reorganized and simplified to improve readability and ease of compliance. The intent is to make it easier for taxpayers to understand their obligations without altering the existing framework.
Simplified Structure of Advance Tax Provisions
Under the new Act, the provisions relating to advance tax have been made more structured and user-friendly. The law now clearly separates:
- Advance tax payable by the assessee on their own calculation
- Advance tax payable as per the order of the Assessing Officer
This segregation removes confusion and ensures better clarity. Additionally, redundant provisions have been eliminated, and a clear formula has been introduced under Section 405 for computing advance tax liability. This makes calculation more systematic and reduces interpretational issues.
Impact of “Tax Year” Concept on Advance Tax
With the introduction of the “Tax Year”, the reference for advance tax liability has changed from “assessment year” to “tax year.” However, practically, there is no change in the timing or manner of payment. Advance tax will continue to be paid during the same year in which income is earned, just as under the earlier law.
This change mainly improves clarity by aligning the tax period with the financial year, thereby eliminating confusion caused by dual-year references.
Advance Tax Instalments and Due Dates
The instalment structure and due dates for advance tax remain unchanged under the new Act. Taxpayers are required to pay advance tax in the following instalments:
- On or before 15th June – Not less than 15% of total advance tax
- On or before 15th September – Not less than 45% of total advance tax
- On or before 15th December – Not less than 75% of total advance tax
- On or before 15th March – 100% of total advance tax
This ensures continuity and allows taxpayers to follow the same compliance schedule as before.
Applicability During Transition Period
Advance tax liability is linked to the tax year to which the income relates, and not merely the date when the new Act comes into force.
For example, advance tax instalments paid during FY 2025–26 (before 1st April 2026) will continue to be governed by the provisions of the Income-tax Act, 1961. Since the obligation to pay such tax arises under the old law, all related consequences, including defaults, will also be governed by the old Act.
Treatment of Default and Interest for Earlier Years
If there is any default in payment of advance tax relating to FY 2025–26, the interest liability will be governed by the provisions of the old Act. Accordingly:
- Interest for default in payment of advance tax will apply under Section 234B
- Interest for deferment of instalments will apply under Section 234C
This ensures that liabilities arising before the implementation of the new Act are handled consistently under the earlier framework.
Advance Tax Threshold under the New Act
Under Section 404 of the Income-tax Act, 2025, the requirement to pay advance tax arises only if the total tax liability during the year is Rs. 10,000 or more. This threshold remains unchanged from the earlier law, ensuring continuity and ease for small taxpayers.
Advance Tax for Tax Year 2026–27 and Beyond
Income earned during FY 2026–27 will be governed by the provisions of the Income-tax Act, 2025. Accordingly, advance tax liability for Tax Year 2026–27 will arise and be discharged under the new Act.
This marks the beginning of full applicability of the new framework for advance tax payments.
Presumptive Taxation Scheme Compliance
For taxpayers opting for the presumptive taxation scheme under Section 58, the requirement remains unchanged. Such taxpayers must pay their entire advance tax liability in one instalment on or before 15th March of the relevant financial year.
This provision continues to provide ease of compliance for small businesses and professionals.
Interest Provisions under the New Act
The interest provisions for defaults in advance tax payment remain the same under the new Act:
- Section 424 (corresponding to Section 234B):
Interest at 1% per month or part thereof for failure to pay advance tax or where less than 90% of assessed tax is paid - Section 425 (corresponding to Section 234C):
Interest at 1% or 3% for deferment of advance tax instalments
These provisions ensure continued discipline and timely compliance with advance tax obligations.
Final Words
The provisions relating to advance tax under the Income-tax Act, 2025 reflect a continuation of existing policy with improved clarity and structure. While there is no change in liability, due dates, or interest provisions, the introduction of the Tax Year concept and simplified drafting makes compliance easier and more intuitive.
Taxpayers should focus on understanding the transition phase and ensure that advance tax payments are aligned with the correct law based on the relevant tax year. With better clarity and structured provisions, the new Act aims to reduce confusion and enhance voluntary compliance.
