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Advance Tax Deadline September 15: Who Needs To Pay 45% Tax and Why Salaried Employees May Also Be Liable?
The September 15 advance tax deadline is approaching, with taxpayers required to pay cumulative 45% of their estimated annual tax liability by the date. Salaried employees with income from FDs, investments, rent or freelance work may also need to pay advance tax if their post-TDS liability exceeds INR 10,000.
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The deadline to deposit the second instalment of advance tax for the financial year 2026–27 is September 15, bringing a crucial compliance checkpoint for individuals earning income outside their regular paychecks. While many salaried professionals assume that mandatory employer deductions cover their full tax obligations, those with earnings from fixed deposits, stock market investments, rental properties, or freelance contracts may face penal interest if their remaining annual tax liability crosses INR 10,000.
Who Needs to Pay Advance Tax?
Advance tax follows a "pay-as-you-earn" framework, requiring taxpayers to pay estimated taxes in scheduled quarterly instalments rather than waiting for annual income tax returns.
The rule applies to any individual whose total estimated tax liability for the financial year exceeds INR 10,000 after adjusting for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS).
Resident senior citizens (aged 60 and above) who do not earn any income from a business or profession remain entirely exempt from advance tax requirements. How To Check Your Income Tax Refund Status Online?
Why Salaried Employees May Still Be Liable
A widespread assumption among salaried workers is that monthly payroll TDS absolves them of advance tax obligations. Tax experts point out that while this holds true for individuals whose only source of earnings is their salary, secondary income can alter the equation quickly.
Unrealized liabilities often stem from:
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Interest earned on savings accounts and fixed deposits
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Dividends and realized capital gains from equities or mutual funds
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Rental income from real estate
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Side gigs, consulting, or freelance assignments
If the tax due on these collective non-salary earnings leaves an unpaid gap greater than INR 10,000 after accounting for TDS, the employee is legally obligated to service advance tax instalments directly. Income Tax Refund: How Soon After Filing ITR Can You Expect Your Refund To Be Credited?
The 45% Threshold by September 15
Advance tax schedules require taxpayers to remit cumulative percentages of their projected annual tax bill across four quarterly milestones:
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June 15: 15% of total estimated tax
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September 15: 45% of total estimated tax
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December 15: 75% of total estimated tax
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March 15: 100% of total estimated tax
To calculate the amount due by September 15, taxpayers must project their total annual gross income, compute the gross tax liability under their chosen tax regime (including the 4% health and education cess), and subtract all TDS, TCS, and June advance tax payments.
If the net remaining tax liability for the year exceeds INR 10,000, cumulative payments by September 15 must equal at least 45% of that net figure. For instance, an individual projecting a net annual post-TDS liability of INR 1,00,000 must ensure that a cumulative INR 45,000 has been deposited by the September deadline.
Rules for Late-Year Income and Capital Gains
Projecting full-year earnings can be challenging for active investors, as profits from equity sales or dividend payouts often occur unpredictably later in the financial year.
Tax regulations accommodate this variability: if capital gains or dividend windfalls materialize after an instalment deadline has passed, taxpayers can pay the corresponding tax in the subsequent scheduled instalment without incurring retroactive interest penalties for the missed earlier quarters.
Penalties and Interest for Underpayment
Missing the September 15 deadline or paying less than the prescribed 45% can trigger penal interest charges under the Income Tax Act:
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Shortfall on instalments (Section 425 / former Section 234C): Deferring or underpaying the September instalment attracts simple interest at 1% per month for a mandatory three-month block, effectively imposing an approximate 3% charge on the shortfall amount.
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Overall shortfall (Section 424 / former Section 234B): If an individual’s total advance tax paid across the entire financial year falls short of 90% of their final assessed tax liability, an additional 1% monthly interest applies from the beginning of the subsequent assessment year until the outstanding dues are settled.
Steps Taxpayers Should Take Now
Ahead of the September 15 cut-off, individuals earning non-salary income should review their consolidated earnings, verify their tax credits via Form 26AS or the Annual Information Statement (AIS) on the tax portal, and calculate whether their net post-TDS liability breaches the INR 10,000 ceiling. Ensuring compliance before the mid-September deadline remains the most effective way to avoid interest charges on unpaid dues.
(The above story first appeared on LatestLY on Sep 09, 2026 09:47 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).
