Advance Tax by 15 December 2026: How a Business Should Estimate the Third Instalment
By 15 December 2026, businesses must have paid 75% of their estimated tax for Tax Year 2026-27, after TDS. Shortfalls attract interest at 1% a month. Estimate the full year from closed half-year accounts and the second half's expected trends, not by doubling the first half. Presumptive taxpayers pay once, by 15 March.
Advance tax is where a business's accounting quality turns into money. Estimate too low and you pay interest. Estimate too high and you lock up cash you need. The third instalment, due 15 December 2026, is the one most businesses get wrong.
The instalments for Tax Year 2026-27
| Due date | Cumulative share of the year's tax |
|---|---|
| 15 June 2026 | 15% |
| 15 September 2026 | 45% |
| 15 December 2026 | 75% |
| 15 March 2027 | 100% |
Advance tax applies if the year's tax, after TDS and TCS, is ₹10,000 or more.
Presumptive taxpayers (small businesses and professionals under the presumptive scheme) pay the whole amount in one instalment by 15 March.
What a shortfall costs
Under the Income-tax Act, 2025 (earlier Sections 234B and 234C), interest is 1% a month on:
- ✓shortfalls in each instalment, for the months until the next due date; and
- ✓the shortfall against 90% of the year's tax, from April until it is paid.
How to estimate at mid-year
- Close the books for April to September, with depreciation, provisions and stock.
- Look at the second half separately. Festive season, year-end orders and price changes matter. Do not just double the first half.
- Add known one-offs: a large contract, an asset sale, interest income.
- Subtract known costs: bonuses, planned hires, year-end discounts.
- Compute tax at your rate, subtract TDS and TCS expected for the year, and pay 75% less what you have already paid.
A worked example
A Jamnagar brass parts company made ₹1.2 crore profit in April to September. October to March is usually 30% stronger, so it estimates ₹1.56 crore for the second half: ₹2.76 crore in all. At a 25% corporate rate plus surcharge and cess, tax is about ₹77 lakh. TDS on its receipts is about ₹2 lakh. 75% of ₹75 lakh is ₹56.25 lakh. It has already paid ₹30 lakh, so it pays ₹26.25 lakh by 15 December.
Frequently asked questions
What if profits fall later in the year?
You pay less in March. Excess advance tax is refunded with interest after the return.
Do salaried people pay advance tax?
Only on income not covered by TDS, such as capital gains, rent or interest.
Can I pay on 15 December itself?
Yes, if the payment goes through that day. Pay a few days early to avoid bank or portal delays.
Sources
- ✓Advance tax under the Income-tax Act, 2025: checklist for TY 2026-27, India Briefing
- ✓Advance tax: due dates and calculation, ClearTax
This is a summary, not tax advice. Confirm with your chartered accountant.
Written by
Founder, Airwix Technologies (Sleet)
Vatsal Sutariya is the founder of Airwix Technologies in Ahmedabad, the company that builds Sleet: SleetHR for HR and payroll, and Sleet Accounting for GST billing and books. He writes about GST, invoicing, business tax and choosing software for Indian businesses, and checks each rule against the official notification before it is published.
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