How to Calculate Your Advance Tax Liability in 5 Steps
Published 30 June 2026 · Tax & Salary
Meena works in Hyderabad as a software consultant. She draws a salary from a company — employer TDS is deducted every month — and also earns ₹6L per year in freelance project fees, with no TDS on that income. She has never paid advance tax. Her question: "Do I need to?" The answer is yes, and the five-step calculation shows exactly how much.
Step 1: Estimate Total Annual Income
Salary income: ₹12,00,000. Freelance income: ₹6,00,000. Total gross income: ₹18,00,000.
Step 2: Apply Deductions (Old Regime)
Meena is on the old regime with the following deductions:
Standard deduction: ₹75,000
Section 80C: ₹1,50,000
Section 80D: ₹25,000
Total deductions: ₹2,50,000. Taxable income: ₹18,00,000 – ₹2,50,000 = ₹15,50,000.
Step 3: Calculate Tax at Old Regime Slabs
Up to ₹2.5L → ₹0
₹2.5L–5L → 5% × ₹2,50,000 = ₹12,500
₹5L–10L → 20% × ₹5,00,000 = ₹1,00,000
₹10L–15.5L → 30% × ₹5,50,000 = ₹1,65,000
Total tax: ₹2,77,500. Cess 4%: ₹11,100. Total tax liability: ₹2,88,600.
Step 4: Subtract Expected TDS
Employer TDS on salary (₹12L income, old regime): approximately ₹1,44,000 (effective rate ~12% on salary portion after standard deduction and 80C). Freelance income: zero TDS deducted by clients (assuming they are paying Meena as an individual without TAN requirements). Total TDS: ₹1,44,000. Remaining advance tax liability: ₹2,88,600 – ₹1,44,000 = ₹1,44,600.
Step 5: Check the ₹10,000 Threshold
₹1,44,600 is far above the ₹10,000 threshold. Meena must pay advance tax. The answer is unambiguous.
Meena's Advance Tax Payment Schedule for FY 2025-26
| Date | % Due | Cumulative | Amount |
|---|---|---|---|
| 15 Jun 2025 | 15% | 15% | ₹21,690 |
| 15 Sep 2025 | 30% | 45% | ₹43,380 |
| 15 Dec 2025 | 30% | 75% | ₹43,380 |
| 15 Mar 2026 | 25% | 100% | ₹36,150 |
Amounts per instalment: ₹1,44,600 × 15% = ₹21,690 in June. ₹1,44,600 × 30% = ₹43,380 each in September and December. ₹1,44,600 × 25% = ₹36,150 in March. Total across all four: ₹1,44,600.
TDS vs Advance Tax: They Both Reduce the Same Liability
TDS is deducted by whoever pays you — employer, bank, client. Advance tax is what you calculate and pay yourself. Both go toward your total annual tax liability. If you over-pay either (your employer deducts too much TDS or you overpay an advance tax instalment), the excess is refunded when you file ITR. The distinction is who initiates the payment, not how it is counted.
Run this for your own numbers
Calculate Your Advance Tax Now →What Most People Get Wrong
They subtract TDS only from the salary portion and forget that their freelance income has no TDS at source — which means the tax on the freelance income is entirely self-assessed and must be paid in advance. Meena's employer TDS of ₹1,44,000 covers only the salary tax. Her ₹6L in freelance income generates a further ~₹1,44,600 in tax (after deductions) that no one deducts for her. That is her advance tax obligation.
Frequently Asked Questions
How do I calculate advance tax in India?
Step 1: Estimate total annual income (salary + capital gains + rent + interest + other). Step 2: Subtract eligible deductions (80C, 80D, standard deduction etc.). Step 3: Calculate tax on taxable income at slab rates including cess. Step 4: Subtract expected TDS. Step 5: If balance > ₹10,000, that is your advance tax liability payable in 4 instalments.
What income do I include in advance tax calculation?
Include all income: salary (from Form 16 or employer estimate), capital gains (STCG and LTCG on stocks/mutual funds), rental income (gross rent minus standard deduction of 30%), interest income (FD, savings bank), freelance or business income, and dividend income above ₹5,000.
What is the difference between TDS and advance tax?
TDS (Tax Deducted at Source) is deducted by your employer, bank, or client from payments made to you. Advance tax is self-assessed tax you calculate and pay directly to the government in 4 instalments. Both go toward your total tax liability — TDS is subtracted before determining advance tax.
What if my income changes during the year?
Advance tax is based on estimated income. If your actual income is higher, you pay more in the next instalment. If lower, you may get a refund when filing ITR. You can revise your estimate upward or downward at each instalment date without penalty for reasonable estimation errors.
What is Section 44AD presumptive taxation for advance tax?
Under Section 44AD, eligible businesses (turnover under ₹2 crore) can declare 8% of turnover (6% if digital receipts) as taxable income without maintaining books. They pay advance tax in one instalment on 15 March instead of 4 instalments. This simplifies advance tax for small businesses.
Have you estimated your advance tax for this year — and does your total tax liability including non-salary income exceed ₹10,000 after subtracting your employer TDS?