Advance Tax Due December 15: 7 Common Mistakes Taxpayers Must Avoid To Escape Penalties

The third instalment of advance tax for FY 2025–26 is due on December 15. Any taxpayer whose estimated tax liability is Rs 10,000 or more after adjusting TDS/TCS is required to pay advance tax. Failure to do so attracts interest and penalties under Sections 234B and 234C of the Income-tax Act. Resident senior citizens aged 60 and above are exempt only if they do not earn business or professional income.

One of the most common mistakes is not accounting for interest income from fixed deposits, recurring deposits, bonds, or savings accounts. Such income is taxable on an accrual basis, not when it is credited. Dividends, unless exempt, must also be included while estimating advance tax.

Taxpayers often apply regular slab rates to income that is taxed at special rates, such as:

Short-term capital gains

Long-term capital gains

Lottery or betting income

Virtual digital assets

Using incorrect rates can lead to underpayment and interest liability.

While calculating advance tax, many people forget to subtract TDS or TCS already deducted. This can result in overpaying tax. Additionally, taxpayers must ensure they calculate tax based on the correct tax regime (old or new) and include eligible deductions, rebates (like Section 87A), and reliefs.

Income often changes during the year due to bonuses, salary hikes, capital gains, or business fluctuations. Advance tax calculations should be revised every quarter. Relying on initial estimates can cause shortfalls in later instalments.

Missing or underpaying advance tax instalments attracts interest under:

Section 234C for shortfall in instalments

Section 234B if 90 percent of total tax is not paid by year-end

Even small delays can compound into significant interest costs.

Mistakes while filling the tax challan—such as entering the wrong PAN, assessment year, or selecting the wrong tax type—can prevent proper credit of payment. Taxpayers also tend to forget one-time or windfall incomes like property sales or sudden capital gains, which must be included in advance tax calculations.