Tag: Advance tax

Advance Tax under the Income-tax Act, 2025: Who Pays, Due Dates, Calculation and Self-Assessment Tax (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 09 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Advance tax is payable in a financial year when the tax payable on the current income, after TDS and TCS, is ₹10,000 or more (sections 403 to 405); a resident individual aged 60 or more with no business or professional income is exempt (section 403(3)).
  • Instalments are 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March; a person who declares presumptive income under section 58(2) (business or specified profession) pays the whole amount by 15 March (section 408).
  • Anything paid by 31 March counts as advance tax of that year; tax still due when the return is filed is self-assessment tax and must be paid, with interest and fee, before the return is furnished (section 266).
  • Missing the schedule attracts interest under sections 424 and 425.

Income tax is meant to be paid as income is earned. TDS does this for salary, interest and similar income. For the rest, the law asks the taxpayer to pay advance tax during the financial year. In the Income-tax Act, 2025 (from 01/04/2026) these rules are in sections 403 to 410, and self-assessment tax is in section 266.

Who must pay (sections 403 and 404)

  • Advance tax is payable on the current income, which is the total income that will be chargeable to tax for the year (section 403(2)).
  • It is payable only if the tax payable for the year, worked out as in section 405, is ₹10,000 or more (section 404).
  • Exempt: a resident individual who is 60 years or more at any time in the tax year and has no income chargeable under the head “Profits and gains of business or profession” (section 403(3)).

How the amount is worked out (sections 405 and 406)

Advance tax = tax on your estimated current income at the rates in force minus the tax that will be deducted or collected at source during the year on income included in that estimate (section 405). You estimate the income yourself and pay on your own accord (section 406). After any instalment you can raise or lower the remaining instalments to match a revised estimate.

Due dates (section 408)

Instalment Due on or before Cumulative advance tax payable
1 15 June Not less than 15%
2 15 September Not less than 45%
3 15 December Not less than 75%
4 15 March 100%

Presumptive taxpayers. A person who declares profits under section 58(2) (Table Sl. No. 1 or 3), that is, the business scheme or the specified profession scheme, pays the whole advance tax by 15 March (section 408(2)). Goods carriage operators under Table Sl. No. 2 follow the four-instalment table.

Any sum paid on or before 31 March counts as advance tax of that financial year for all purposes (section 408(3)).

Example. Tax on estimated income is ₹1,80,000 and TDS of ₹30,000 will be deducted during the year, so advance tax is ₹1,50,000. The instalments are: ₹22,500 by 15 June; a cumulative ₹67,500 by 15 September (so ₹45,000 more); a cumulative ₹1,12,500 by 15 December (₹45,000 more); and the balance, ₹37,500, by 15 March.

When the Assessing Officer asks (sections 407 and 409)

An Assessing Officer can order advance tax from a person already assessed, on the higher of the income in the latest regular assessment or the income in any later return. The order must be passed by the last day of February and is followed by a demand notice (section 407(1) to (3)). If a later return or assessment follows, the order can be amended before 1 March (section 407(4) and (5)). You can reply with your own lower estimate, but if your estimate is higher, you must pay on the higher figure by the last instalment (section 407(8) and (9)). Failure to follow the order, or to send the intimation in time, makes you an assessee in default (section 409). Advance tax is credited in the regular assessment for the tax year in which it was payable (section 410).

Self-assessment tax (section 266)

After taking into account advance tax, TDS and TCS, tax relief and foreign tax credit, any tax that remains payable on the basis of your return is self-assessment tax. You must pay it, with the interest and fee payable for a delay in filing or a default in advance tax, before you furnish the return, and the return must carry proof of payment (section 266(1)). If you pay less than the total, the payment is applied first to the fee, then to the interest, then to the tax (section 266(3)).

What happens if advance tax is short or late

Interest is charged at 1% a month on shortfalls and delays under sections 424 and 425, explained in the post on interest for delay and default in the Income-tax Act, 2025. Presumptive taxpayers who miss 15 March are charged 1% on the shortfall (section 425(3)).

Practical points

  1. Re-estimate income before each instalment, especially after capital gains, a bonus or a large business receipt.
  2. Include all TDS in your estimate, but only on income that is part of your estimate (section 405).
  3. Keep proof of every payment, and check that it appears in your tax statement before you file the return.
  4. A senior citizen with pension and interest income only is exempt, but one with business income pays advance tax like anyone else.

How CSM & Co LLP can help

We estimate advance tax each quarter for businesses, professionals and investors, and handle interest and notices when a payment was missed. Please reach out to our team and we will be happy to assist.

Frequently asked questions

Who has to pay advance tax?

Any assessee whose tax payable for the year, after TDS and TCS on income that is taxed, is ₹10,000 or more (sections 404 and 405). A resident individual who is 60 years or more at any time in the tax year and has no income from business or profession does not have to pay advance tax (section 403(3)).

What are the advance tax due dates for 2026-27?

15% by 15 June 2026, 45% by 15 September 2026, 75% by 15 December 2026 and 100% by 15 March 2027, each as reduced by the amounts already paid (section 408(1)).

I use presumptive taxation. When do I pay advance tax?

If you declare profits under section 58(2) for a business or a specified profession (Table Sl. No. 1 or 3), the whole advance tax is due on or before 15 March (section 408(2)).

Can I pay the advance tax after 15 March?

An amount paid on or before 31 March is treated as advance tax paid in that financial year (section 408(3)), but interest for the shortfall at the earlier instalment dates is still charged under section 425.

What is self-assessment tax?

Tax still payable on the basis of the return after crediting advance tax, TDS, TCS, tax relief and foreign tax credit. It must be paid, along with interest and fee for any delay in filing or default in advance tax, before the return is furnished, and the return must carry proof of payment (section 266). If the payment is short, it is applied first to the fee, then interest, then tax.

Can the Assessing Officer ask me to pay advance tax?

Yes. If you have already been assessed, the Assessing Officer can require advance tax on the higher of your last regularly assessed income or the income in a later return, by an order passed no later than the last day of February (an amended order before 1 March), followed by a demand notice. You can send an intimation if you estimate a lower figure, and you must pay more if your own estimate is higher (section 407).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Freelancer Income Tax in India: Presumptive or Actual Books, TDS, Advance Tax and Audit (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 23 July 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • A freelancer’s fees are income from business or profession. For a specified profession (which now lists information technology) the Income-tax Act, 2025 lets a resident individual declare 50% of gross receipts up to ₹50 lakh (₹75 lakh if cash receipts are at most 5%) under section 58, with no books or audit.
  • The alternative is actual books: income is receipts less allowable expenses and depreciation, and an audit is needed once gross receipts in a profession exceed ₹50 lakh (section 63).
  • Clients deduct tax at source from professional fees at 10% (technical services at 2%) when the payment crosses ₹50,000 (section 393(1) Table Sl. No. 6); this is credited against your tax.
  • A presumptive taxpayer pays the whole advance tax by 15 March (section 408(2)); everyone else pays in four instalments.

A freelancer (a software developer, designer, consultant, writer, chartered accountant or similar) earns income from business or profession. This post explains the choices open to a resident individual freelancer under the Income-tax Act, 2025, which applies from 01/04/2026: whether to use the presumptive scheme or actual books, what tax clients deduct, when advance tax is due and when an audit is needed.

Step 1: Two ways to compute the income

Point Presumptive (section 58) Actual books (section 62)
Who Resident individual, HUF or firm other than an LLP, in a specified profession Anyone
Receipts limit ₹50 lakh; ₹75 lakh if cash receipts are 5% or less of the total No limit, but an audit applies above ₹50 lakh
Income 50% of gross receipts (or more, if the actual profit is higher) Receipts less allowable expenses and depreciation
Expenses None to prove; all are taken as covered by the 50% Must be actually incurred for the work and supported by bills
Books Not required Required in the form prescribed (Rule 46)
Audit None (section 63(2)) Needed if gross receipts exceed ₹50 lakh
Advance tax Whole amount by 15 March Four instalments

Who is a “specified profession”?

Section 62(4) lists legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology and company secretary, plus any other profession the Board notifies. A freelance developer or IT consultant is therefore covered. For another kind of freelance work, check whether it fits the list or can be treated as a business under the business scheme in section 58 (6% or 8% of receipts, up to ₹2 crore).

Books requirement

A person in a specified profession must always keep books (section 62(1)(a)). For other professions and business, books are required if income exceeds ₹1,20,000 or receipts exceed ₹10 lakh in any of the three preceding years (or likely in the current year if newly started). For an individual or HUF the figures are ₹2,50,000 of income and ₹25 lakh of receipts (section 62(2)). Rule 46 lists what a professional must keep.

Step 2: Worked example

Asha is a resident freelance software consultant (a specified profession). In the tax year 2026-27 she receives ₹30,00,000 from clients, all through the bank. She has no other income. She is in the new tax regime. Her actual expenses are ₹12,00,000.

Particulars Presumptive (section 58) Actual books
Gross receipts ₹30,00,000 ₹30,00,000
Income ₹15,00,000 (50%) ₹18,00,000 (receipts less ₹12,00,000)
Tax on slabs (section 202(1)) ₹1,05,000 ₹1,60,000

Slab calculation, presumptive: nil up to ₹4,00,000; 5% on the next ₹4,00,000 is ₹20,000; 10% on the next ₹4,00,000 is ₹40,000; 15% on the next ₹3,00,000 is ₹45,000; total ₹1,05,000. For actual books the same slabs give ₹20,000 plus ₹40,000 plus ₹60,000 (15% on ₹4,00,000) plus ₹40,000 (20% on ₹2,00,000) which is ₹1,60,000. The rebate under section 156(2) does not help at these incomes: it gives full relief only up to a total income of ₹12 lakh, and above ₹12 lakh it applies only if the tax is more than the income above ₹12 lakh (here ₹1,05,000 is less than ₹3,00,000, and ₹1,60,000 is less than ₹6,00,000). Health and education cess applies on top.

The presumptive route gives the lower tax here because her expenses (40% of receipts) are less than half of her receipts. If her expenses were 70% of receipts, actual books would show income of ₹9,00,000, less than the presumptive ₹15,00,000. Declaring that lower figure means keeping books under section 62 and getting an audit under section 63 (Table Sl. No. 2). Compare both every year.

Step 3: TDS from clients

Companies and many other clients deduct tax at source from your fees (section 393(1), Table Sl. No. 6(iii)):

Nature of payment Rate Threshold
Fees for professional services 10% ₹50,000
Fees for technical services that are not professional services 2% ₹50,000
Payee engaged only in the business of a call centre 2% ₹50,000

“Professional services” are services in legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising or other notified professions (definition in section 393). An individual or HUF who pays a freelancer and is not otherwise required to deduct tax is liable only when the payment exceeds ₹50 lakh in a year, at 2% (Table Sl. No. 6(ii)). Check the “TDS” credit in your tax statement before filing; it reduces your tax, and a refund arises if the TDS is more than the tax.

Step 4: Advance tax

  • If you declare income under section 58(2) (business or specified profession), the whole advance tax is due on or before 15 March of the financial year (section 408(2)).
  • Otherwise, advance tax is paid in four instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March (section 408(1)). Any amount paid by 31 March counts for the year (section 408(3)).
  • Interest is charged for a shortfall or delay under the interest provisions of the Act, which were not examined for this post.

Step 5: Audit and return

  • No audit if you declare the section 58 income (section 63(2)).
  • Audit if you keep actual books and gross receipts in the profession exceed ₹50 lakh (section 63, Table Sl. No. 1(c)), or if you claim a lower profit than the presumptive figure (Table Sl. No. 2). The audit report is in Form 26.
  • Return: a freelancer files the return of income each year. The ITR form depends on the Rule 164 conditions; the presumptive income is normally reported in the form for presumptive business income, and a freelancer with actual books and other heads uses the general business form.
  • Due date: 31 August for a person whose accounts are not required to be audited (section 263(1)(c) Table Sl. No. 3 as substituted by Finance Act 2026), and 31 October if the accounts are audited.

Common mistakes

  1. Treating foreign client receipts as not taxable: a resident is taxed on income from all sources; export of services is a separate topic (including the GST side) that this post does not cover.
  2. Forgetting the 15 March advance tax under presumptive taxation, and then paying interest.
  3. Claiming lower profit than 50% without books or an audit.
  4. Mixing personal and business payments, which makes actual-book claims difficult to support.
  5. Taking cash receipts above 5% and assuming the ₹75 lakh limit still applies.

How CSM & Co LLP can help

We help freelancers choose between presumptive and actual taxation, maintain books, file returns, plan advance tax and handle tax audits. Please reach out to our team and we will be happy to assist.

Frequently asked questions

Is a freelancer’s income salary or business income?

Fees from clients are income from business or profession, not salary, even if all the work is for one client. If you keep actual books, the expenses of earning it are deductible; a freelancer who also has a job reports the salary separately.

Can a freelancer use presumptive taxation?

Yes, if the freelancer is a resident individual, HUF or firm other than an LLP and the profession is a “specified profession”: legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology, company secretary, or any other profession the Board notifies (section 62(4)). Income is taken as 50% of gross receipts, up to ₹50 lakh of receipts, or ₹75 lakh if cash receipts are at most 5% of the total (section 58). Other freelancers, such as writers or designers, should check whether their work falls in the list or can use the business scheme.

When is advance tax due?

A freelancer who declares income under section 58(2) (business or specified profession) pays the whole advance tax on or before 15 March of the financial year (section 408(2)). Everyone else pays 15% by 15 June, 45% by 15 September, 75% by 15 December and the full amount by 15 March (section 408(1)).

How much TDS will clients deduct?

10% of fees for professional services, 2% for fees for technical services that are not professional services, and 2% for a call centre, in each case once a payment crosses ₹50,000 (section 393(1), Table Sl. No. 6(iii)). An individual or HUF client who is not otherwise required to deduct tax is liable only above ₹50 lakh in a year, at 2% (Table Sl. No. 6(ii)). The TDS appears in Form 26AS and the annual tax statement and is credited against your tax.

Is an audit needed?

Not if you declare the section 58 presumptive income (section 63(2)). Otherwise a person carrying on profession must get accounts audited if gross receipts exceed ₹50 lakh in the tax year (section 63, Table Sl. No. 1(c)); if you declare less than the presumptive profit, books under section 62 and an audit under section 63, Table Sl. No. 2, can also apply.

Does GST apply to freelancers?

GST is under a separate law with its own registration threshold and rules, and was not examined for this post. Check the current position at gst.gov.in before you cross the registration limit, or when you serve clients outside India.

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.