Should I pay advance tax if income is below ₹12 lakh under new regime?

For FY26, I am expected to have bank interest income of about ₹3 lakh. I also have short-term capital gains from listed shares at ₹3 lakh. Am I required to pay any advance tax under the new tax regime?

If the total tax payable by you (net of tax deducted at source or TDS) during the year exceeds ₹10,000, you are required to pay advance tax, irrespective of the tax regime. In your case, no tax would be payable on the bank interest, as the income is below the limit of ₹4 lakh under the new tax regime, which is now the default tax regime. In the case of short-term capital gains on listed shares, you need to pay tax on gains of ₹2 lakh (instead of ₹3 lakh) on account of the unutilized slab of ₹1 lakh (the difference between the limit of ₹4 lakh and the bank interest income of ₹3 lakh). The tax payable on such gains would be at 20%, which would amount to ₹40,000 (plus education cess of 4%). Assuming a TDS of ₹30,000 on the bank interest, your net tax liability would be ₹10,000 plus ₹400 education cess. Therefore, you would be liable to pay advance tax. As the tax is payable on the capital gains, you need not estimate the amount of capital gains to be earned for the year but pay the advance tax on the capital gains over the remaining instalments for the year after the date of transfer of the shares.

Please note that while a rebate of ₹60,000 is available to residents with income up to ₹12 lakh and tribunals have taken a view that the rebate applies even on short-term capital gains, there has been an amendment in section 87A to the effect that the amount of rebate shall not exceed the rate provided in section 115BAC. Although the intention behind this amendment is to deny the rebate against tax on short-term capital gains, the language of the amendment seems to indicate that the rebate would be available to the extent of the rates prescribed under section 115BAC, which in this case would be 5%. However, the tax returns and tax utility may not permit such a claim. Therefore, practically, to avoid litigation, it may be advisable not to claim a rebate against the short-term capital gains and pay the advance tax accordingly.

It is assumed that you are not a senior citizen. Senior citizens (age 60 years and above) without any income from business or profession are not required to pay advance tax.

-Mahesh Nayak, chartered accountant, CNK & Associates.

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