Miss the 15 September advance-tax date and it's Section 425 now, not 234C

Every August, the same conversation happens at the office: a client who filed their return in July, paid whatever "self-assessment tax" the software asked for, and assumed that was that. Then a demand notice arrives the following year with interest attached — for tax that should have been paid during the year, not after it. That interest is advance tax's entire purpose, and this year the notice will cite a section number most people have never seen before.

From 1 April 2026, the Income-tax Act, 2025 replaced the 1961 Act. "Previous Year" and "Assessment Year" are gone, folded into a single "Tax Year" — so Tax Year 2026-27 is what used to be called FY 2026-27 / AY 2027-28. Advance tax itself hasn't changed in substance. What has changed is the citation: the sections that used to be 207 to 210 are now 403 to 406, and the interest sections everyone actually feels — 234B and 234C — are now 424 and 425. The 15 September instalment is the first one to fall due entirely inside this renumbered law.

Who actually has to pay this

Section 403 (old Section 207) sets the basic rule: if your net tax for the year — after subtracting TDS and TCS already deducted — comes to ₹10,000 or more, you must pay advance tax. This applies to individuals, proprietorships, partnerships and companies alike; there is no lower turnover threshold that exempts a small business. The one carve-out is a resident senior citizen (60 years or older during the tax year) who has no income from business or profession — pension, rent and FD interest don't count as business income, so they can simply pay at return-filing time.

Example: a Ring Road embroidery-unit owner whose books show ₹42,000 net tax after TDS on job-work receipts must pay advance tax — turnover of ₹3 crore or ₹30 lakh makes no difference to this rule. His 68-year-old father, who draws only a pension and interest on fixed deposits and runs no business himself, is exempt and can settle the whole amount when filing the return.

How much is due by 15 September

Section 405 (old Section 209) is the computation rule: estimate your total income for the Tax Year, work out tax on it at the applicable rates plus cess, then subtract TDS/TCS already deducted or expected on that income. What's left is your advance tax for the year, and it is paid in a fixed, cumulative ladder — 15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March. Each figure is cumulative, not a fresh instalment on top of the last: the 45% due on 15 September already includes the 15% you paid in June.

Example: the embroidery unit above estimates ₹3,00,000 as its full-year advance tax. By 15 June it should have paid ₹45,000 (15%). By 15 September its total paid-to-date must reach ₹1,35,000 (45%) — so if it paid exactly ₹45,000 in June, it owes another ₹90,000 by 15 September, not ₹1,35,000 again. A trading firm whose export orders picked up over the summer should also re-estimate the year's income now, rather than carrying forward the June estimate unchanged — the law expects the September figure to reflect your current view of the year, not your April guess.

What missing the date actually costs

Two interest provisions do the work that Sections 234B and 234C used to do, at the same 1%-a-month simple interest rate:

Section 424 (old 234B) bites at year-end: if the advance tax actually paid is nil, or falls short of 90% of the tax finally assessed, interest runs at 1% a month (part of a month counts as a full month) from 1 April of the following year until the tax is paid — on the entire shortfall.

Section 425 (old 234C) bites quarter by quarter: if the cumulative percentage due on 15 June, 15 September or 15 December is not met, interest of 1% a month runs for three months on that shortfall; miss the 15 March figure and it's 1% for one month. There is a narrow relief built in — no interest under this section if at least 12% of the year's tax was paid by 15 June, or at least 36% by 15 September, even if that's short of the full 15%/45%.

Example: a diamond-workshop owner who pays nothing until March, then settles the full ₹3,00,000 while filing, is not saving anything — Section 425 charges roughly 1% a month on the June, September and December shortfalls (about 9% in total on those portions, worked out instalment by instalment), on top of whatever Section 424 adds if the year-end payment still lands after 31 March. On a ₹3 lakh liability that easily runs into five figures of interest for money that could simply have been paid on time.

The exception: presumptive-scheme taxpayers

If your business genuinely qualifies under the presumptive scheme — Section 44AD for eligible traders and small manufacturers (turnover up to ₹2 crore, or ₹3 crore where cash receipts don't exceed 5% of turnover), or Section 44ADA for eligible professionals — you can skip the quarterly ladder entirely and pay 100% of your advance tax in one instalment by 15 March. This is a genuine simplification, but it only helps if the scheme actually fits: a business that has crossed the turnover limit, or that maintains regular books and claims actual expenses instead of the presumptive rate, is back on the four-instalment schedule and Section 424/425 apply exactly as above if the March payment is short.

The interest was never about the section number. It was always about the calendar — and the calendar hasn't moved.

Why the renumbering happened at all

The Income-tax Act, 2025 restructures the old 1961 Act — over 800 sections down to around 536 — mainly to remove obsolete provisions and simplify cross-references; it was not written to change how much tax anyone owes. For most taxpayers, rates, deductions and exemptions carry over unchanged. The practical effect this year is narrower: your accounting software, any demand notice, and this year's ITR utility will show "Section 424" or "Section 425" where last year's showed "234B" or "234C" for the same 1% monthly interest, on the same shortfall, calculated the same way. Knowing that saves a confused phone call when a client's notice looks unfamiliar — the substance underneath it is not.

Sources

This article is general information, not professional advice. Rules change; verify current provisions or contact the office for advice on your situation.