Advance Tax September 2026: 45% Payment Rule, Calculation & Section-Wise Interest
TL;DR The second instalment of Advance Tax for Tax Year 2026–27 is due on 15 September 2026. By this date, taxpayers liable to pay advance tax generally need to have paid at least 45% of their estimated annual advance-tax liability, after considering amounts already paid in earlier instalments. The Income Tax Department confirms the 15 June, 15 September, 15 December and 15 March instalment framework. The Income Tax Act, 2025 applies to advance tax for Tax Year 2026–27. The threshold remains ₹10,000 or more of tax payable during the year, after considering the applicable provisions. The new Act has reorganised the advance-tax provisions without changing the underlying policy. Section 405 provides the advance-tax computation formula, while Section 424 corresponds to old Section 234B for default in payment of advance tax and Section 425 corresponds to old Section 234C for deferment of instalments. The interest rates remain unchanged. Introduction September is an important month for taxpayers with income that is not completely covered by TDS. Business owners, professionals, freelancers, consultants, investors, landlords and other taxpayers may have additional tax liability during the year. Instead of paying the entire tax at the end of the financial year, the advance-tax system requires eligible taxpayers to pay tax progressively during the year. For Tax Year 2026–27, the second advance-tax instalment becomes due on 15 September 2026. The key requirement is the 45% cumulative payment rule. This means that by 15 September, the taxpayer should generally have paid at least 45% of the estimated annual advance-tax liability, after reducing the amount already paid in the first instalment. Understanding this calculation is important because an insufficient instalment can result in interest for deferment of advance tax. What Is Advance Tax? Advance tax is income tax paid during the financial year instead of waiting until the end of the year to pay the entire liability. It is particularly relevant when tax is payable on income where TDS or TCS does not fully cover the final tax liability. Examples include: Business income Professional income Freelance income Rental income Interest income Capital gains Dividend income Other taxable income not adequately covered by TDS Under the new Income Tax Act, 2025, the advance-tax threshold remains ₹10,000 or more of tax payable during the year under the applicable advance-tax provisions. Why Is 15 September 2026 Important? The 15 September 2026 deadline represents the second advance-tax instalment for Tax Year 2026–27. The cumulative payment target by this date is 45% of the estimated annual advance tax. The important word is cumulative. You do not necessarily have to pay 45% again in September. Instead, you calculate the total advance tax required up to September and subtract the amount already paid in June. Example Suppose your estimated annual advance-tax liability is ₹2,00,000. By September, 45% should have been paid: ₹2,00,000 × 45% = ₹90,000 If you already paid ₹30,000 in June, your September instalment would generally be: ₹90,000 − ₹30,000 = ₹60,000 Therefore, your cumulative advance tax after the September payment becomes ₹90,000. The official Income Tax Department guidance confirms the 45% cumulative requirement for the second instalment. Advance Tax Due Dates for Tax Year 2026–27 The regular advance-tax schedule is based on cumulative percentages. 15 June 2026 – First Instalment Taxpayers generally need to pay at least 15% of the estimated annual advance-tax liability by 15 June. 15 September 2026 – Second Instalment By 15 September, cumulative advance-tax payment should generally reach 45%. 15 December 2026 – Third Instalment By 15 December, cumulative payment should generally reach 75%. 15 March 2027 – Final Instalment By 15 March, the taxpayer should generally have paid 100% of the advance-tax liability. The notified 2026 tax rules retain this instalment structure. Advance Tax September 2026: How to Calculate the 45% Payment Calculating the September instalment requires estimating your total tax liability for Tax Year 2026–27. A simplified calculation can be approached as follows. Step 1: Estimate Your Total Annual Income Start by estimating all taxable income expected during the year. This may include: Salary Business income Professional receipts Interest Rental income Capital gains Dividend income Other taxable receipts Step 2: Calculate the Estimated Tax Apply the relevant tax rates and applicable provisions to your estimated taxable income. The calculation should also consider applicable deductions, exemptions, surcharge and cess where relevant. Step 3: Reduce TDS and TCS Estimate the TDS and TCS that will actually be available as credit. This is important because advance tax is not calculated simply on gross income. If sufficient TDS is already being deducted, the remaining advance-tax liability may be lower. Step 4: Determine Advance-Tax Liability After considering applicable tax credits, determine the estimated advance-tax amount payable for the year. Step 5: Calculate 45% Multiply the estimated annual advance-tax liability by 45%. Step 6: Subtract Advance Tax Already Paid Finally, subtract the amount already paid in the June instalment. The resulting amount is generally the amount required to bring cumulative advance-tax payment to the September target. Example of September Advance Tax Calculation Suppose a professional estimates the following for Tax Year 2026–27: Estimated total tax liability: ₹3,00,000 Estimated TDS/TCS credit: ₹50,000 Therefore: Estimated advance-tax liability = ₹3,00,000 − ₹50,000 = ₹2,50,000 The September cumulative requirement is: ₹2,50,000 × 45% = ₹1,12,500 If ₹37,500 was already paid in June: September payment = ₹1,12,500 − ₹37,500 = ₹75,000 After paying ₹75,000 in September, cumulative advance tax becomes ₹1,12,500. Who Needs to Pay Advance Tax? Advance tax generally applies when the taxpayer’s estimated tax payable for the year reaches the prescribed threshold after considering relevant tax credits. It can affect: Business Owners Business owners may have substantial tax liability that is not fully covered by TDS. Freelancers and Consultants Professionals receiving payments with limited or insufficient TDS may need to estimate their annual tax liability. Investors Large capital gains, dividend income or interest income can create additional tax liability. Landlords Rental income can create tax liability beyond the TDS deducted by other income sources. Salaried Individuals Salaried taxpayers are often covered substantially through employer TDS,
