Advance Tax Calculation for Capital Gains from Shares and Property
- Nimisha Panda
- Nov 3
- 10 min read
Advance tax applies to income that attracts a tax liability of ₹10,000 or more in a financial year, including gains from shares, mutual funds, or property sales. It ensures taxpayers pay taxes in installments throughout the year instead of at once while filing returns. Capital gains, being unpredictable, often create confusion about when and how to pay advance tax. Understanding the correct calculation and due dates is crucial to avoid interest under Sections 234B and 234C. TaxBuddy provides a simplified solution for managing and paying advance tax seamlessly through its user-friendly app.
Table of Contents
What is Advance Tax
Advance tax is the method of paying income tax in installments during the financial year, instead of settling the entire amount at the end of the year while filing the income tax return. It ensures steady tax collection for the government and reduces the financial burden on taxpayers. Under Section 208 of the Income Tax Act, 1961, anyone whose estimated total tax liability for a financial year is ₹10,000 or more must pay advance tax.
This system applies to all types of income—salaries, business profits, professional earnings, rental income, and most importantly, capital gains arising from the sale of assets such as shares, mutual funds, and property. The key idea is that tax must be paid in the same year in which income is earned, rather than deferring it until filing time. This helps taxpayers stay compliant and avoid paying interest or penalties later.
Applicability of Advance Tax on Capital Gains
Capital gains are inherently unpredictable because they depend on when an asset is sold. This makes it difficult to forecast them at the start of the financial year. However, the Income Tax Act requires that once a capital gain is realized, the corresponding tax must be paid as advance tax in the same financial year.
For example, if you sell shares in November or property in January, you must pay the applicable advance tax either in the same quarter or in the next installment, whichever is due soonest. If no installment is due, the payment must be made before March 31 to avoid interest under Sections 234B and 234C. These sections impose penalties for shortfall or delay in payment.
Essentially, advance tax on capital gains ensures timely reporting of transactions and smooth compliance for taxpayers with investment income.
Advance Tax Due Dates and Installments for FY 2024–25
The Income Tax Department has set specific due dates and installment percentages for advance tax payments. For the financial year 2024–25, the schedule is as follows:
Installment Due Date | Percentage of Total Tax Liability Payable | Description |
15th June | 15% | 1st installment |
15th September | 45% (Cumulative) | 2nd installment |
15th December | 75% (Cumulative) | 3rd installment |
15th March | 100% (Cumulative) | Final installment |
If the entire tax liability cannot be estimated at the beginning of the year, taxpayers can adjust subsequent payments as new income sources—like capital gains—arise. Paying the correct proportion of advance tax by each date helps avoid interest charges.
Capital Gains Tax Rates for Shares and Property
Capital gains are classified as short-term or long-term depending on the holding period of the asset. The applicable tax rates for FY 2024–25, as per the Finance Act 2024, are:
Short-Term Capital Gains (STCG) on shares and equity mutual funds: 15% under Section 111A.
Long-Term Capital Gains (LTCG) on shares and equity funds: 10% on gains exceeding ₹1 lakh under Section 112A.
LTCG from property sales: 12.5% for individuals and HUFs (without indexation) as per Budget 2024 updates.
Previously, the LTCG on property was taxed at 20% with indexation. However, from April 2024 onwards, the rate has been reduced to 12.5% and the benefit of indexation has been withdrawn. This change has simplified tax calculations and encouraged timely compliance through advance tax payments.
How to Calculate Advance Tax on Capital Gains
The process of calculating advance tax on capital gains involves a few systematic steps:
Estimate total income for the financial year, including salary, business, interest, and rental income.
Add capital gains realized during the year. For instance: Capital Gains = Sale Price – (Purchase Price + Cost of Improvement + Transfer Expenses).
Apply exemptions if eligible:
Section 54: Exemption for reinvestment in residential property.
Section 54EC: Exemption for investment in specified bonds.
Section 80C/80D: Deductions for investments and health insurance.
Calculate total tax liability using applicable slab rates and capital gains tax rates.
Deduct TDS or advance tax already paid to arrive at the net payable amount.
Pay advance tax through Challan 280 on the Income Tax Department’s e-Pay Tax portal.
If the calculated advance tax liability exceeds ₹10,000, it must be paid according to the due dates mentioned earlier. TaxBuddy’s mobile app simplifies this entire process by automatically estimating tax based on uploaded documents and transaction data.
Advance Tax Calculation Examples
Example 1: A taxpayer sells shares in November 2024 and realizes a long-term capital gain of ₹2,00,000. The tax rate applicable is 10% (beyond ₹1 lakh). The advance tax of ₹10,000 must be paid by December 15 to avoid interest under Section 234C.
Example 2: A property is sold in January 2025, resulting in a gain of ₹10,00,000. The applicable LTCG tax rate is 12.5%, making the total tax ₹1,25,000. Since the transaction occurred in the last quarter, the full tax must be paid by March 15 or latest by March 31.
These examples highlight that advance tax payments are tied directly to the timing of capital gain realisation, ensuring compliance within the financial year.
Interest on Non-Payment or Delay in Advance Tax
Two major sections deal with penalties for non-payment or delay of advance tax:
Section 234B: Imposes interest when 90% of the total tax liability is not paid by March 31. Interest is charged at 1% per month from April until the date of payment.
Section 234C: Applies when there’s a delay in paying specific installments. The rate is 1% per month on the shortfall amount for each due date missed.
These provisions ensure that taxpayers remain disciplined about making timely payments. Regularly tracking liabilities through platforms like TaxBuddy helps avoid unnecessary penalties and ensures compliance without stress.
Latest Updates from Budget 2025 and Notifications
Budget 2025 introduced refinements to simplify the tax system, particularly under the new regime. It increased the standard deduction, adjusted income tax slabs, and made small yet meaningful amendments in eligible exemptions. For investors, clarity around capital gains and TDS reporting has been enhanced.
CBDT notifications have also streamlined e-filing procedures and compliance timelines. Taxpayers now benefit from improved digital platforms that make advance tax calculation and payment more efficient. These updates aim to promote transparency and ensure taxpayers face fewer hurdles when switching between old and new regimes.
Simplify Advance Tax Payments with TaxBuddy
Managing advance tax on capital gains can be time-sensitive and complex, especially when multiple income sources are involved. TaxBuddy’s mobile app offers a comprehensive solution for automated advance tax computation, payment scheduling, and filing support.
The app tracks due dates, calculates liability based on real-time portfolio data, and sends reminders for upcoming installments. Whether it’s shares, property, or other income, TaxBuddy ensures accurate calculations, preventing penalties under Sections 234B and 234C. It’s an ideal tool for individuals and businesses looking for a smart, seamless way to stay compliant.
Conclusion
Advance tax ensures that taxpayers pay as they earn, promoting both discipline and convenience. For those earning capital gains from shares or property, timely payment is crucial to avoid penalties and interest. With recent updates in tax rates and improved digital compliance tools, paying advance tax has become more straightforward than ever.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides both self-filing and expert-assisted plans to cater to different types of taxpayers. The self-filing plan is ideal for individuals who are comfortable preparing and submitting their own ITR with the help of a guided, step-by-step interface. It allows easy uploading of Form 16, prefilled data, and automatic tax computation. On the other hand, the expert-assisted plan is designed for those who prefer professional guidance. A tax expert reviews your documents, ensures accurate filing, and helps you claim all eligible deductions and exemptions. This flexibility enables taxpayers to select a filing option that best suits their comfort level and complexity of income.
2. Which is the best site to file ITR?
The best site to file ITR is one that combines accuracy, ease of use, and secure handling of personal data. The official Income Tax e-filing portal is always a reliable choice for direct submissions. However, for a smoother and more guided experience, platforms like TaxBuddy stand out. TaxBuddy offers an AI-driven filing system with automated data extraction, deduction optimization, and expert-assisted support. It reduces errors and ensures compliance with the latest tax rules. The platform’s intuitive design helps even first-time filers complete the process confidently.
3. Where to file an income tax return?
An income tax return can be filed through the official Income Tax Department e-filing portal (https://www.incometax.gov.in) or through authorized tax-filing platforms such as TaxBuddy. While the government portal requires manual entry of income details and tax computation, TaxBuddy simplifies the process by automatically importing Form 16 data, investment proofs, and bank information. This integration reduces the chances of manual errors and saves time. Once the return is filed, you can e-verify it instantly through Aadhaar OTP or net banking.
4. Do I need to pay advance tax if I only earn capital gains income?
Yes, advance tax applies even if your only source of income is from capital gains, provided the total tax payable for the financial year exceeds ₹10,000. This includes both short-term and long-term capital gains from assets such as shares, mutual funds, or property. The advance tax must be paid in the quarter in which the gain is realized. For example, if you sell shares in November, you must pay tax by December 15 or March 15, depending on the timing. Paying advance tax on time helps avoid interest under Sections 234B and 234C.
5. What if I realize capital gains after the last advance tax installment?
If you realize capital gains after the final advance tax due date (March 15), you are still required to pay the tax before March 31 of the same financial year. This ensures you are compliant and do not attract interest under Section 234B for shortfall or delayed payment. The law acknowledges that capital gains are uncertain and may arise late in the year, which is why paying before March 31 is considered timely. Even if the payment is made on March 31, it will be treated as advance tax for that year.
6. Can capital losses offset my advance tax liability?
Yes, capital losses can be set off against capital gains while calculating advance tax liability. Short-term capital losses can offset both short-term and long-term capital gains, while long-term capital losses can only offset long-term capital gains. This adjustment reduces your overall taxable amount and, consequently, the advance tax payable. However, if your losses cannot be adjusted within the same year, they can be carried forward for up to eight assessment years, as long as you have filed your return within the due date.
7. How do I pay advance tax online?
Advance tax can be paid online through the Income Tax Department’s e-Pay Tax service using Challan 280. Here’s the process:
Visit the official portal: https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
Select the option “Challan 280” for payment of advance tax.
Enter your PAN, assessment year, and payment details.
Choose the payment method (Net Banking, UPI, Debit Card).
Once the payment is completed, download and save the receipt (Challan Identification Number - CIN) for future reference. This receipt acts as proof of payment and is required during ITR filing. TaxBuddy also provides a simplified option to calculate and pay advance tax directly through its mobile app.
8. What happens if I overpay advance tax?
If you pay more advance tax than your actual tax liability, the excess amount will be refunded by the Income Tax Department after your return is processed. The refund is issued with interest under Section 244A of the Income Tax Act. The interest is calculated from April 1 of the assessment year until the date of refund, at a rate of 0.5% per month. To ensure faster refunds, it is important to pre-validate your bank account on the Income Tax portal. TaxBuddy’s platform helps verify refund status and tracks whether the refund has been credited correctly.
9. Is advance tax applicable to both short-term and long-term capital gains?
Yes, advance tax is applicable to both short-term and long-term capital gains. The nature of the gain only affects the applicable tax rate, not the requirement to pay advance tax. For example, short-term capital gains on equity shares (Section 111A) are taxed at 15%, while long-term gains above ₹1 lakh (Section 112A) are taxed at 10%. Similarly, for property, long-term gains are taxed at 12.5% without indexation. Regardless of whether your gains are short-term or long-term, if your total tax liability exceeds ₹10,000, you must pay advance tax within the stipulated deadlines.
10. What are the consequences of not paying advance tax?
Failure to pay advance tax or paying less than 90% of your total liability by March 31 attracts interest under Sections 234B and 234C.
Section 234B: Charges 1% interest per month from April until the actual date of payment if the total advance tax paid is less than 90% of the final tax liability.
Section 234C: Charges 1% interest per month for delays in each installment (June 15, September 15, December 15, and March 15). Additionally, non-payment may increase your financial burden at the time of filing returns. Timely advance tax payments ensure smooth compliance and reduce last-minute stress.
11. Can salaried individuals with capital gains be liable for advance tax?
Yes, salaried individuals may still have to pay advance tax if they earn additional income such as capital gains, rent, or interest, which is not covered under TDS by their employer. Even if tax is deducted from salary income, capital gains are treated as separate income, and if the overall tax payable (after TDS) exceeds ₹10,000, advance tax must be paid. TaxBuddy helps salaried taxpayers compute their advance tax precisely by factoring in salary, investments, and capital transactions.
12. Does the TaxBuddy app support advance tax payment reminders?
Yes, the TaxBuddy mobile app includes a built-in advance tax management feature that automatically tracks your tax liability and sends timely reminders before each due date. It analyzes your portfolio and financial data to calculate accurate tax estimates, ensuring you never miss a payment. The app also allows direct payment through secure integration with the Income Tax e-Pay Tax portal. By automating reminders and calculations, TaxBuddy helps users avoid penalties under Sections 234B and 234C and ensures a stress-free compliance experience.
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