Advance Tax for Companies: Rules & Due Dates

Advance Tax for Companies

Every company in India pays advance tax, not as an option but as a near-universal obligation, since the Rs. 10,000 threshold that triggers the requirement is one that virtually every functioning company crosses within its first profitable year. Unlike individuals, companies get no exemptions based on age or income source, and unlike individuals, companies face a second calculation most people never have to think about: comparing their normal tax liability against Minimum Alternate Tax, and paying advance tax on whichever figure is higher.

This page sits at the intersection of two clusters: our Business Tax Filing guide, which covers tax compliance for businesses broadly, and our Private Limited Company Registration guide, since advance tax becomes a live obligation from a company's very first profitable quarter, sometimes its very first year. This page exists specifically for the company-level mechanics: the instalment schedule, the MAT comparison, the interest consequences of getting it wrong, and what a newly incorporated company with no prior-year numbers actually does at its first due date.

Quick Answer: Advance Tax for Companies

• Every company pays advance tax once estimated tax liability for the year exceeds Rs. 10,000, a threshold nearly every operating company clears.
• The instalment schedule is the same for companies as for any other taxpayer since Budget 2016 standardised it: 15% by 15 June, 45% cumulative by 15 September, 75% cumulative by 15 December, and 100% by 15 March.
• Companies subject to Section 115JB (those not opting for the concessional regimes) must compute both their normal tax liability and their Minimum Alternate Tax (15% of book profit) at every instalment, and pay advance tax on whichever is higher.
• Companies under Section 115BAA (22%) or 115BAB (15%) are exempt from MAT entirely, simplifying this comparison away.
• A brand-new company still owes advance tax in its first profitable year; there's no first-year exemption, only the practical challenge of estimating income without a prior year to reference.
• Missing an instalment attracts interest under what were Sections 234B and 234C of the Income Tax Act, 1961, now renumbered under the Income Tax Act, 2025, which took effect from 1 April 2026.

Why the ₹10,000 Threshold Barely Matters for Companies

For an individual, the Rs. 10,000 tax liability threshold genuinely screens out a lot of people, salaried employees with tax fully covered by employer TDS, retirees living on modest pension income, and so on. For a company, this threshold rarely does any screening at all. A company with even modest profitability crosses Rs. 10,000 in tax liability almost immediately, which is why, in practice, advance tax isn't really a conditional obligation for companies the way it is for individuals, it's closer to a standing compliance requirement from the point a company starts generating taxable profit.

The Legal Framework Just Changed: Income Tax Act, 2025

This is worth knowing before anything else, since it affects exactly which section numbers apply to a company's advance tax obligations going forward. The Income Tax Act, 2025 replaced the Income Tax Act, 1961, effective 1 April 2026. The advance tax provisions themselves, the liability trigger, the instalment percentages, and the due dates, carried forward unchanged in substance, but they now sit under different section numbers:

• Liability and instalment schedule: previously Sections 208 through 219 of the 1961 Act, now Sections 403 to 410 of the 2025 Act.
• Interest for default or shortfall: previously Sections 234B and 234C, now Sections 424 and 425 (with Section 423 covering related interest provisions).

The practical substance hasn't changed, the same percentages, the same due dates, the same MAT interaction, but any company checking a due date or a penalty provision against older reference material should confirm they're looking at the correct, current section numbers under the 2025 Act, not the retired 1961 numbering that a large amount of existing published content still uses.

Corporate Tax Rates That Determine the Estimate

Getting the advance tax estimate right starts with knowing which tax regime the company is actually under, since the applicable rate changes the entire calculation:

• Normal regime: 30% for most domestic companies, or 25% for companies with turnover up to Rs. 400 crore in the relevant preceding year.
• Section 115BAA: a flat 22% base rate, available to any domestic company regardless of size or turnover, with an effective rate of roughly 25.17% after a flat 10% surcharge and 4% cess. Companies opting in give up most deductions and exemptions, and once elected, the option can't be withdrawn.
• Section 115BAB: a flat 15% base rate (roughly 17.01% effective) for new domestic manufacturing companies meeting specific conditions.
• Minimum Alternate Tax (MAT), under Section 115JB: 15% of book profit, applicable to companies that haven't opted for 115BAA or 115BAB.

MAT: The Comparison That Makes Company Advance Tax Different

This is the single biggest structural difference between advance tax for companies and advance tax for anyone else. A company still operating under the normal regime, rather than 115BAA or 115BAB, has to calculate two separate figures at every instalment: tax payable under the normal provisions, and tax payable under MAT (15% of book profit, as computed under the Companies Act profit and loss account, not the tax computation). Whichever figure is higher becomes the basis for that instalment's advance tax payment.

This comparison matters most for companies with significant deductions or exemptions that push their normal tax liability well below what their accounting book profit would suggest, exactly the situation MAT exists to catch. Getting this comparison wrong at the estimation stage, using only the normal-regime figure when MAT is actually higher, results in a shortfall against the true instalment percentage, which then attracts interest even though the company genuinely believed it had paid enough.

Companies under Section 115BAA or 115BAB skip this comparison entirely, since both regimes are explicitly excluded from MAT under Section 115JB. This is one of the several simplifications these concessional regimes offer, alongside the flat rate itself, and it's worth factoring into the decision of whether to opt in, not just the headline rate difference.

The Instalment Schedule

Since Budget 2016 standardised the schedule across all taxpayer categories, companies follow the same four-instalment structure as any other advance tax payer:

Before 2016, companies followed a different, more front-loaded schedule than individuals and other non-corporate taxpayers. That distinction no longer exists; every category of assessee now follows the identical percentages and dates above.

Interest for Missing an Instalment

Two interest provisions apply if a company underpays or misses an instalment, now sitting under the Income Tax Act, 2025's renumbering (previously Sections 234B and 234C under the 1961 Act):

• Interest for shortfall in total advance tax paid by year-end, generally calculated at 1% per month on the unpaid amount from the due date until the actual payment or the date of assessment.
• Interest for deferment of individual instalments, calculated separately if the cumulative percentage paid by any of the four due dates falls short of what should have been paid by that date, even if the year-end total eventually catches up.

Because MAT and normal-regime tax can diverge meaningfully, a company that gets the higher-of comparison wrong at an early instalment can end up owing instalment-deferment interest for that specific quarter, even if the full year's tax is ultimately paid correctly by March. This is exactly why running both calculations at every instalment, not just at year-end, matters more for companies than the flat "one number" estimate that works for most individual taxpayers.

Advance Tax for a Newly Incorporated Company

This is where the Private Limited Company Registration side of this topic becomes directly relevant. A company incorporated partway through a financial year, with no prior year's return to reference, still owes advance tax from its very first profitable quarter if estimated liability crosses Rs. 10,000. There's no first-year exemption or grace period built into the law.

The practical difficulty is entirely about estimation, not obligation. A new company generally has:

• No previous year's assessed income to use as a baseline, the way an established company might extrapolate from last year's return.
• Limited operating history, making revenue and profit projections inherently less reliable in the first few quarters.
• Front-loaded costs (incorporation expenses, initial hiring, setup costs) that can make early-quarter profitability genuinely hard to forecast accurately.

In practice, this means leaning on internal management information, sales pipeline data, budget variance reports, rather than waiting for finalised statutory accounts, particularly for the June and September instalments. The March instalment, by contrast, comes after three quarters of real operating data, and should be a considerably more accurate estimate than the first one was.

TDS Credit Reduces the Actual Cash Outflow

Advance tax liability is calculated net of tax already deducted or collected at source on the company's income. If a meaningful share of a company's revenue is already subject to TDS by clients or customers, the actual advance tax cash payment required is lower than the gross estimated tax figure would suggest. This is worth factoring into cash flow planning specifically, since a company estimating its instalments purely off gross projected tax, without netting off expected TDS credit, risks overpaying relative to what's actually still owed.

How Companies Pay Advance Tax

Advance tax is paid through Challan 280 on the income tax portal, selecting the appropriate assessment year and instalment. Payment can be made online through net banking or a payment gateway linked to the portal. The payment gets credited against the company's PAN and reconciles automatically with Form 26AS and the eventual annual return, so accuracy in selecting the correct assessment year and instalment number at the time of payment matters, a misallocated payment can complicate reconciliation later even though the money itself reached the government correctly.

Common Mistakes Companies Make With Advance Tax

• Estimating only the normal-regime tax figure and skipping the MAT comparison entirely, for companies that haven't opted into Section 115BAA or 115BAB.
• Treating the first year after incorporation as exempt, when there's no such exemption, only a practical estimation challenge.
• Waiting for finalised statutory accounts before estimating each instalment, rather than using current management information, which tends to produce late, rushed, and often inaccurate estimates for the earlier instalments.
• Ignoring TDS credit when estimating cash outflow, leading to overpayment relative to actual remaining liability.
• Referencing outdated section numbers from the 1961 Act in internal compliance checklists without updating to the current Income Tax Act, 2025 numbering.
• Missing the MAT credit carry-forward opportunity. Excess MAT paid over normal tax in a given year becomes MAT credit under Section 115JAA, available for set-off against normal tax for up to 15 years, but this only helps if the company is tracking it correctly year over year.

Frequently Asked Questions

Do all companies have to pay advance tax?

Effectively, yes. The Rs. 10,000 threshold that triggers the obligation is one that nearly every profitable, operating company crosses, so advance tax functions as a standing compliance requirement for companies rather than a conditional one, unlike for individuals, where salaried employees and certain senior citizens are often exempt in practice.

What is MAT, and why does it affect a company's advance tax?

Minimum Alternate Tax, under Section 115JB, is a 15% levy on book profit, designed to ensure companies with large accounting profits don't pay negligible tax through deductions and exemptions. Companies not opting for Section 115BAA or 115BAB have to calculate both normal tax and MAT at every advance tax instalment and pay whichever is higher.

Does a newly incorporated company get any exemption from advance tax in its first year?

No. If estimated tax liability for the year exceeds Rs. 10,000, advance tax applies from the company's first profitable year, the only real challenge is estimating income accurately without a prior year's data to reference.

What are the advance tax due dates for companies in 2026?

The same four dates that apply to all taxpayers: 15 June (15% of estimated liability), 15 September (45% cumulative), 15 December (75% cumulative), and 15 March (100%). This has been standardised across taxpayer categories since Budget 2016.

Which section of the law now governs advance tax interest for companies?

Sections 424 and 425 of the Income Tax Act, 2025, effective from 1 April 2026, which replaced the previous Sections 234B and 234C of the Income Tax Act, 1961. The interest calculation itself hasn't changed, only the section numbering.

Do companies under Section 115BAA still need to calculate MAT for advance tax?

No. Companies that have opted for Section 115BAA (22% regime) or Section 115BAB (15% regime for new manufacturing) are specifically excluded from MAT under Section 115JB, which removes the need for the dual calculation entirely.

Get Your Company's Advance Tax Estimates Right, Every Quarter

Between the MAT comparison, the renumbered 2025 Act provisions, and the estimation challenge every newly incorporated company faces, advance tax for companies has more moving parts than a single quarterly reminder captures. LegalDev's CAs handle advance tax computation and payment for companies at every stage, from first incorporation through ongoing compliance. See our Business Tax Filing service for ongoing corporate tax compliance, or our Private Limited Company Registration guide if you're setting up a new company and want advance tax planning built in from day one.