Advance Tax Payments and Section 143(1): How Timely Payments Can Affect Your Tax Notices and ITR Filing
- Nimisha Panda
- May 16
- 9 min read
Advance tax payments are a vital part of the Indian tax system, designed to ensure taxpayers meet their tax obligations throughout the financial year instead of waiting until the end. Paying advance tax on time helps taxpayers avoid last-minute hassles, interest charges, and complications during income tax return (ITR) filing. The Income Tax Department closely monitors these payments and compares them with the tax declared in the ITR.
Timely advance tax payments help prevent discrepancies between self-assessed taxes and the Income Tax Department’s records, significantly reducing the chances of receiving Section 143(1) notices. Ensuring full and on-time payment avoids interest, penalties, and tax adjustments, thereby enabling a smoother ITR filing process for FY 2025-26. When advance tax is underpaid or delayed, it often triggers adjustments and notices under Section 143(1), which can lead to additional tax demands and scrutiny. Proper compliance not only saves time but also safeguards taxpayers from unnecessary financial burdens.
Table of Contents
How Advance Tax Payments Work for FY 2025-26
Advance tax is the mechanism through which taxpayers pay their income tax liability in installments during the financial year, rather than as a lump sum when filing the tax return. For FY 2025-26, this means estimating taxable income and corresponding tax liability early in the year and paying it progressively as income is earned.
This system helps taxpayers manage their cash flows and prevents a sudden large tax payment at year-end. Regular taxpayers must pay advance tax in multiple installments, while presumptive taxpayers have a simplified single payment deadline.
The advance tax paid is adjusted against the final tax liability when filing the Income Tax Return (ITR). If the advance tax payments fall short, interest and penalties can apply. Hence, estimating income realistically and making timely payments is critical. It also reduces mismatches in tax records, minimizing the risk of triggering Section 143(1) notices from the tax department.
Key Deadlines and Payment Percentages for Advance Tax
For FY 2025-26, the Income Tax Department mandates the following schedule and minimum payment percentages for advance tax:
Due Date | Payment Percentage (Regular Taxpayers) | Presumptive Taxpayers (Sections 44AD/44ADA) |
15 June 2025 | 15% of estimated tax liability | Not applicable |
15 September 2025 | 45% cumulative (including earlier payments) | Not applicable |
15 December 2025 | 75% cumulative | Not applicable |
15 March 2026 | 100% cumulative | 100% (single installment due) |
Regular Taxpayers: The payments must be cumulative; for example, by 15 September 2025, total payments should equal at least 45% of the total advance tax liability. Failure to pay these percentages at each deadline attracts interest penalties.
Presumptive Taxpayers: Taxpayers under presumptive schemes (Sections 44AD or 44ADA) have a simplified advance tax obligation — they must pay 100% of their estimated tax liability by 15 March 2026. They are not required to pay in installments throughout the year. Adhering to these deadlines is essential. Missing them triggers interest under Sections 234B and 234C, and increases scrutiny during tax return processing. Staying updated on deadlines helps avoid penalties and cash flow surprises.
Impact of Late or Underpaid Advance Tax on Section 143(1) Notices
Section 143(1) notices are issued after processing the ITR to highlight discrepancies between the taxpayer’s self-assessed tax and the Income Tax Department’s records. Late or underpaid advance tax payments are a common trigger for these notices. The department identifies mismatches such as:
Undeclared Income: Capital gains, freelance earnings, rental income, or interest income not disclosed fully.
Excessive Deductions: Overclaimed deductions under Sections 80C, 80D, or others beyond legal limits.
TDS or Advance Tax Credits: Differences in tax credits due to delayed or insufficient tax payments.
Such discrepancies result in tax adjustments reflected in the intimation notice. The taxpayer is often required to pay the additional demand with interest, or justify the difference with documentation. These notices can delay refunds, increase compliance burdens, and escalate to further scrutiny if ignored. Timely and correct advance tax payments greatly reduce the risk of such notices.
How Section 143(1) Amendments Increase Notice Scrutiny
In FY 2025-26, Section 143(1) has been amended to mandate deeper cross-verification of tax returns against previous years’ filings. The Central Board of Direct Taxes (CBDT) now requires the tax department to examine:
Variations in declared income and deductions year-on-year.
Consistency in claims for exemptions and allowances.
Proper reflection of TDS and advance tax credits.
This increased scrutiny means taxpayers face greater chances of receiving notices for any irregularities, even minor ones. Maintaining consistent, accurate declarations and keeping thorough documentation for income and deductions is now more important than ever. The amendment aims to detect discrepancies early, ensuring better compliance and reducing the need for prolonged assessments.
Advance Tax Compliance: Differences for Presumptive Taxpayers
Presumptive taxation offers a simplified tax scheme where income is calculated as a fixed percentage of turnover or gross receipts. While this eases tax calculations, it does not exempt taxpayers from advance tax obligations.
Presumptive taxpayers must pay 100% of their advance tax liability by 15 March 2026 in a single installment.
Unlike regular taxpayers, they do not have staggered installment requirements.
Failure to pay this full amount by the deadline attracts interest penalties under Sections 234B and 234C.
Proper planning is vital since the lump sum payment can create cash flow pressure. Presumptive taxpayers should track their turnover and calculate tax liability regularly to ensure they meet this payment on time. Failure to comply increases the risk of Section 143(1) notices and interest charges.
H2 - Interest and Penalties for Delayed or Shortfall Payments
Interest penalties safeguard government revenue when advance tax payments are late or inadequate:
Section 234B: Imposes 1% interest per month or part thereof on the tax shortfall starting April 1 after the financial year until payment date. This applies if advance tax paid is less than 90% of the assessed tax liability.
Section 234C: Levies interest for each missed or underpaid installment, calculated on the shortfall for that period according to the schedule.
Both these interest charges accumulate monthly and can significantly increase the total tax burden. Combined with additional scrutiny from Section 143(1) notices, taxpayers face complex compliance challenges. Timely payments and monitoring avoid these costs and legal hassles.
Role of Accurate Advance Tax in Seamless ITR Filing
Making accurate and timely advance tax payments aligns the tax already paid with the total liability declared in the Income Tax Return. This alignment:
Minimizes chances of reassessment or adjustment notices under Section 143(1).
Reduces delays in receiving refunds due to mismatches.
Lowers the likelihood of triggering penalty notices or interest demands.
Eases the return filing process and fosters financial discipline.
Accurate advance tax planning also improves cash flow management and helps taxpayers avoid last-minute tax payments.
Is Timely Advance Tax Payment Crucial for Avoiding Tax Notices?
Absolutely. The Income Tax Department uses advance tax payment records to validate the tax paid against the income declared in ITRs. Delays or short payments act as red flags, triggering automated Section 143(1) notices seeking explanations or additional payments.
Timely advance tax payments:
Demonstrate good compliance and reduce risk of notices.
Help taxpayers avoid interest penalties and prolonged assessments.
Facilitate smoother refund processing and financial planning.
Non-compliance, even if inadvertent, may result in higher penalties and increased scrutiny.
How Technology Simplifies Advance Tax Compliance and Notice Management
Digital tax platforms and mobile apps have transformed advance tax management by providing:
Real-time Tax Calculators: Instantly estimate tax liability based on current income and applicable slabs, updated with the latest government notifications.
Automated Reminders: Alerts for upcoming advance tax due dates to prevent missed payments.
Payment Tracking: Monitor TDS, advance tax credits, and outstanding liabilities to avoid shortfalls.
Notice Assistance: Expert reviews and guidance to respond effectively to Section 143(1) notices.
Seamless Filing: Direct submission of tax payments and responses through integrated app interfaces for faster resolution.
These tools reduce errors, save time, and help taxpayers stay fully compliant with minimal stress.
Conclusion
For FY 2025-26, advance tax payments remain a cornerstone of effective tax compliance. Timely adherence to scheduled installments and accurate payments reduce interest liability, avoid Section 143(1) notices, and ensure hassle-free ITR filing. Presumptive taxpayers must remember their single payment deadline and plan accordingly. The recent amendments to Section 143(1) increase scrutiny, making consistency and documentation paramount. Leveraging technology simplifies compliance and notice management, empowering taxpayers to meet obligations efficiently. Prioritizing advance tax discipline safeguards against avoidable disputes and promotes a smooth tax experience.
Frequently Asked Questions
1. Who is required to pay advance tax for FY 2025-26?
Advance tax payment is mandatory for individuals, businesses, and professionals whose estimated tax liability exceeds ₹10,000 during the financial year 2025-26. This includes salary income, business profits, capital gains, freelance income, and other taxable sources. Even if tax is deducted at source (TDS), taxpayers must pay advance tax if their net liability after TDS exceeds ₹10,000. This ensures tax is collected progressively rather than in a lump sum at year-end.
2. What are the advance tax due dates for FY 2025-26?
Regular taxpayers must pay advance tax in four installments during the year:
15 June 2025: At least 15% of total estimated tax
15 September 2025: Cumulative 45%
15 December 2025: Cumulative 75%
15 March 2026: 100% of estimated tax liability
Presumptive taxpayers under Sections 44AD and 44ADA pay 100% of their advance tax by 15 March 2026 in a single installment. Missing these deadlines can attract interest penalties.
3. What happens if I pay less than the required advance tax installment?
Paying less than the prescribed amount or delaying payment leads to interest penalties under Sections 234B and 234C of the Income Tax Act. Section 234B charges interest at 1% per month on the shortfall from April 1 following the financial year until the payment date. Section 234C imposes interest for each missed installment. Additionally, underpaid advance tax increases the likelihood of receiving Section 143(1) notices seeking explanations or additional tax payments.
4. How do Section 143(1) notices relate to advance tax?
Section 143(1) notices are issued when the Income Tax Department detects discrepancies between the tax paid (including advance tax) and the tax declared in the filed ITR. If advance tax payments are late, insufficient, or don’t align with the declared income, the department raises adjustment notices. These notices inform taxpayers of differences in tax liability and often require payment of additional tax with interest or submission of clarifications.
5. Are presumptive taxpayers exempt from advance tax payments?
No. While presumptive taxpayers enjoy simplified income calculation, they must pay 100% of their advance tax by 15 March 2026. They do not have to pay in staggered installments like regular taxpayers but cannot avoid advance tax altogether. Failure to pay the full amount by the deadline leads to interest charges and tax notices.
6. Can I revise advance tax payments during the year?
Yes. Taxpayers can revise their advance tax payments if income estimates change during the financial year. For example, if income increases or new income sources arise, additional advance tax payments must be made to avoid shortfall interest. However, revisions must be made before the due dates, and failure to pay the correct cumulative amounts by deadlines still attracts penalties.
7. What documents help respond to Section 143(1) notices?
To respond effectively to Section 143(1) notices, taxpayers should keep:
Advance tax payment challans and receipts
Income proofs such as salary slips, bank statements, capital gains statements
TDS certificates (Form 16/16A)
Investment proofs for claimed deductions
Any correspondence or explanations related to income or deductions
Proper documentation supports clarifications and helps resolve disputes quickly.
8. Does timely payment guarantee no tax notices?
Timely and correct advance tax payment significantly reduces the chance of receiving tax notices. However, notices may still arise due to other issues like undisclosed income, errors in return filing, or mismatches in TDS credits. Therefore, while advance tax compliance lowers risks, it does not guarantee complete immunity from notices.
9. Can technology help with advance tax management?
Yes. Modern tax apps and online platforms assist taxpayers by:
Calculating estimated tax liabilities dynamically
Sending automated reminders for advance tax due dates
Tracking payments made and outstanding amounts
Providing expert assistance to respond to tax notices
Allowing easy filing of tax returns and payment challans
These tools simplify tax compliance, minimize errors, and reduce stress.
10. What penalties are imposed for non-compliance with advance tax rules?
Non-compliance results in:
Interest penalties under Sections 234B (interest on shortfall) and 234C (installment-related interest)
Possible tax demand notices and reassessment under Section 143(1)
Delayed refunds or blocked refund processing
Additional scrutiny and potential legal complications if notices remain unaddressed
11. How do advance tax rules differ under old and new tax regimes?
The advance tax payment schedule remains the same under both regimes. However, the tax liability calculation differs because the old and new regimes have different slab rates, deductions, and exemptions. Consequently, installment amounts may vary based on the regime chosen, but deadlines and interest rules are uniform.
12. How can I avoid Section 143(1) notices related to advance tax?
To avoid these notices:
Estimate income and tax liability accurately throughout the year
Pay advance tax timely as per schedule and in correct amounts
Maintain consistent income declarations and deduction claims year over year
Keep thorough documentation of all income, payments, and deductions
Use technology tools to track payments and respond promptly if notices are received
Proactive compliance significantly reduces the risk of notices and penalties.
