Advance Tax for Businesses: How to Calculate and Pay

Advance tax for businesses means paying your income tax during the year in instalments, as you earn, rather than in a lump sum after the year ends. Companies, firms, LLPs and proprietors whose tax liability for the year is expected to be ₹10,000 or more must pay advance tax by specified dates, and shortfalls attract interest. For a growing SMB, advance tax is also a cash-flow planning exercise: four payments a year that must be estimated from current profits. This guide explains who must pay, the instalment schedule, a worked calculation for a company, presumptive taxpayers, how interest is charged and a quarterly routine. The Income-tax Act, 2025 took effect from 1 April 2026 and renumbered sections; we refer to concepts and mention old section numbers where useful.

Who must pay advance tax

• Any person whose estimated tax liability for the year, after deducting TDS and TCS, is ₹10,000 or more.
• This includes companies, LLPs, partnership firms, proprietors and professionals.
• Resident senior citizens without business or professional income are exempt.
• Taxpayers under the presumptive schemes for small businesses and professionals (formerly sections 44AD and 44ADA) pay in a single instalment by 15 March.

Instalment schedule

Due date	Cumulative advance tax payable
On or before 15 June	At least 15% of estimated tax
On or before 15 September	At least 45%
On or before 15 December	At least 75%
On or before 15 March	100%

For presumptive taxpayers, the whole amount is payable by 15 March. Any amount paid by 31 March is treated as advance tax for the year. Confirm the dates under the current Act on the income-tax portal.

Step-by-step calculation

1. Estimate total income for the year: start with year-to-date profit from your books, project the remaining months, and adjust for known items such as large orders, price changes and seasonal patterns.
2. Make tax adjustments: add back disallowable expenses (for example, payments to micro and small enterprises not made within the permitted time, or expenses where TDS was not deducted), apply depreciation as per tax rules rather than books, and include other income.
3. Apply the tax rate for your entity and chosen regime, plus surcharge and health and education cess.
4. Deduct TDS and TCS expected to be credited for the year.
5. Apply the cumulative percentage for the instalment and subtract what you have already paid.

Worked example: a private limited company

A Bengaluru private limited company opted for the concessional regime for domestic companies (formerly section 115BAA), with a base rate of 22%, a 10% surcharge and 4% cess, giving an effective rate of 25.168%. It estimates taxable income of ₹50,00,000 for the year and expects TDS of ₹1,00,000 to be deducted by customers.

Line	Amount
Estimated taxable income	₹50,00,000
Tax at 25.168%	₹12,58,400
Less expected TDS	₹1,00,000
Advance tax payable for the year	₹11,58,400

Due date	Cumulative %	Cumulative amount	Payment in that instalment
15 June	15%	₹1,73,760	₹1,73,760
15 September	45%	₹5,21,280	₹3,47,520
15 December	75%	₹8,68,800	₹3,47,520
15 March	100%	₹11,58,400	₹2,89,600

Check: ₹1,73,760 + ₹3,47,520 + ₹3,47,520 + ₹2,89,600 = ₹11,58,400. If estimates change during the year, recompute the remaining instalments on the revised figure. Rates and regimes may change under the new Act; confirm the rate applicable to your company with your CA.

Worked example: a proprietor under the presumptive scheme

A proprietor running a trading business opts for the presumptive scheme and estimates tax of ₹1,20,000 for the year after considering all deductions. No instalments are due in June, September or December. The full ₹1,20,000 is due by 15 March. If the proprietor pays by 31 March, it is still treated as advance tax, though interest for deferment may apply for the delay beyond 15 March.

Interest on shortfall and deferment

Two interest provisions (formerly sections 234B and 234C) apply:

Interest	When	How much
For deferment of instalments (formerly 234C)	Cumulative advance tax paid by an instalment date is less than the required percentage	1% per month on the shortfall, for 3 months for the June, September and December instalments and 1 month for the March instalment
For default in payment (formerly 234B)	Advance tax paid by 31 March is less than 90% of the assessed tax	1% per month on the shortfall from 1 April until the tax is paid

There is relief from deferment interest for the June and September instalments if at least 12% and 36% respectively were paid by those dates. Profits from unforeseeable windfalls such as capital gains after an instalment date also have specific relief.

Example: missed June instalment

If the company above pays nothing by 15 June, the shortfall is ₹1,73,760. Interest at 1% per month for 3 months is approximately 3% of the shortfall, about ₹5,213 (the law rounds amounts to the nearest hundred for this calculation, so the exact figure may differ slightly). If the company catches up fully by 15 September, no further deferment interest arises for that instalment.

Advance tax for partnership firms and LLPs

Partnership firms and LLPs are taxed at a flat rate (30% under the earlier law) plus surcharge where income exceeds ₹1 crore and 4% cess. Remuneration and interest paid to partners within the limits allowed by law are deductible for the firm and taxable in the partners' hands, so they reduce the firm's advance tax but may create advance tax liability for the partners individually.

Example: A firm estimates profit before partners' remuneration of ₹40,00,000 and plans to pay remuneration of ₹15,00,000 within the permitted limits. Taxable income is ₹25,00,000. At 30% plus 4% cess (no surcharge below ₹1 crore), tax is 31.2% of ₹25,00,000 = ₹7,80,000. With expected TDS of ₹30,000, advance tax payable is ₹7,50,000, and the June instalment is 15% of that, ₹1,12,500. Each partner then estimates their own advance tax on the remuneration received, taking into account the regime they choose.

Linking GST data to advance tax estimates

For many SMBs, GST returns are the most up-to-date view of revenue during the year. Monthly GSTR-1 turnover and GSTR-3B figures give a quick check on whether your profit projection is realistic. If outward supplies for the first five months are 30% higher than last year, an advance tax estimate based on last year's profit is too low. Using the same transaction data for GST and income-tax estimates also reduces the risk of differences that the department may notice when comparing your GST turnover with your income-tax return.

Paying advance tax

1. Log in to the income-tax e-filing portal and choose e-Pay Tax.
2. Select the assessment year and the type of payment as advance tax.
3. Choose the tax type (income tax for companies or other than companies).
4. Enter the amount and pay through net banking, UPI, card or bank counter options listed on the portal.
5. Save the challan identification number (CIN) and reconcile it in Form 26AS or the portal's tax credit statement.

A quarterly estimation routine

1. First week of June, September, December and March: close books for the previous month and run a provisional profit and loss.
2. Project the rest of the year using the order book, seasonality and expected costs.
3. Apply tax adjustments: disallowances, depreciation differences and income from other sources.
4. Check TDS credits in the tax credit statement rather than relying only on books.
5. Compute the cumulative instalment and pay by the 15th, ideally a few days earlier.
6. Record the assumptions so the next estimate starts from them.

Two adjustments are commonly missed. First, payments to micro and small enterprises not made within the time allowed are disallowed (formerly section 43B(h)); our MSME 45-day rule guide explains this. Second, expenses on which TDS was not deducted are partly disallowed.

Common mistakes

• Using last year's tax as the estimate when this year's profits are much higher.
• Forgetting surcharge and cess in the rate.
• Counting TDS that customers have deducted but not deposited.
• Paying under the wrong assessment year or payment type.
• Ignoring disallowances that increase taxable income.
• Leaving everything to March and paying deferment interest on three instalments.

How Fininvo helps

Advance tax estimates are only as good as the profit figures behind them. Fininvo ERP produces financial reports from posted transactions during the year and reconciles TDS with Form 26AS and AIS, which gives you a current starting point each quarter. See reports, accounting and pricing.

General information, not tax advice. Rates, regimes and section numbers changed with the Income-tax Act, 2025; consult your CA for your computation.

Frequently Asked Questions

Is advance tax mandatory for small businesses?

Yes, if the estimated tax liability after TDS and TCS is ₹10,000 or more. Presumptive taxpayers pay in a single instalment by 15 March.

What if my income estimate changes during the year?

Revise the estimate and adjust the remaining instalments. Interest is computed on actual shortfalls against the required percentages of the final tax.

Can I pay all advance tax in March?

You can, but interest for deferment will apply on the June, September and December shortfalls unless you are a presumptive taxpayer.

Does TDS count towards advance tax?

TDS and TCS are deducted from estimated tax to arrive at the advance tax payable. Only amounts actually deposited and reflected in your tax credit statement are reliable.

What happens if I pay more advance tax than needed?

The excess is refunded after you file your return, with interest as provided by law.