Income tax in India is meant to be paid during the year, not only when you file. Salaried people mostly meet this through TDS deducted by the employer. F&O profit has no TDS, so a trader who makes money is usually expected to pay part of the tax in advance.
General information, not tax advice
This article explains the rules in general terms for education. It is not tax advice and may not fit your situation. Tax law and due dates change, and the Income-tax Act, 2025 is new, so some points are still being interpreted. Consult a chartered accountant before you file or make a decision.
Who has to pay
You have to pay advance tax if your estimated tax for the year, after TDS and tax collected at source, is ₹10,000 or more. Resident senior citizens who have no business income are exempt, but F&O is business income, so a senior citizen with F&O profit is not covered by that exemption.
The four instalments
| Pay by | Cumulative share of the year's tax | Example: tax of ₹1,20,000 |
|---|---|---|
| 15 June | 15% | ₹18,000 |
| 15 September | 45% | ₹54,000 |
| 15 December | 75% | ₹90,000 |
| 15 March | 100% | ₹1,20,000 |
Those using presumptive taxation can instead pay the whole amount by 15 March in one instalment.
Interest for paying too little or too late
Two kinds of interest apply, each at 1% per month. They were sections 234B and 234C of the 1961 Act and are sections 424 and 425 of the 2025 Act.
- Shortfall in an instalment: interest on the amount short, generally for three months for each of the first three instalments and one month for the last. It is not charged if at least 12% was paid by 15 June and 36% by 15 September.
- Shortfall for the year: if the advance tax paid is less than 90% of the tax finally due, interest runs on the unpaid amount from 1 April after the year ends until it is paid.
Example of instalment interest (illustrative)
With a year's tax of ₹1,20,000, ₹18,000 is due by 15 June. If nothing is paid by then, interest of 1% for three months on ₹18,000 comes to ₹540. Shortfalls at the later dates are charged the same way.
This interest is calculated automatically when the return is processed. It cannot be waived on request, so it is a real cost of not paying on time.
Estimating when profits are uneven
F&O profits are lumpy. You might be up in June and down by December. The law asks for an estimate based on what you know at each date, so a practical approach is to work out the tax on your profit to date, add tax on your other income, and pay up to the required percentage at each instalment.
- Take net profit after charges and STT from your broker's P&L as the starting point, minus other trading expenses.
- Include other income that has no TDS, such as interest or rent.
- Subtract TDS already deducted, for example from salary.
- If you lose money later in the year, the excess paid is refunded after you file.
Advance tax is paid online through the e-filing portal under the e-pay tax option, choosing advance tax and the correct tax year.
If you missed it altogether
Paying late is still better than not paying. Any tax that remains unpaid when you file is paid as self-assessment tax, together with the interest, before the return is submitted. The interest keeps running month by month until the tax is paid, so the earlier the shortfall is cleared, the lower the cost. Keep the payment challans; the return asks for their details and they also appear in your annual tax statement.
Examples use illustrative values, not current market data. This is general education, not investment advice.